Does Adverse Selection Justify Government Intervention in Loan Markets?

35 Pages Posted: 14 Nov 2012

Date Written: 1994

Abstract

Some economists argue that models of adverse selection in loan markets can display market failures that rationalize a welfare-enhancing role for government intervention. Such models impose restrictive assumptions on the way agents interact. The same adverse selection models with a less restrictive definition of equilibrium display endogenous financial intermediaries and predict no welfare-enhancing role for the government.

Suggested Citation

Lacker, Jeffrey M., Does Adverse Selection Justify Government Intervention in Loan Markets? (1994). FRB Richmond Economic Quarterly, vol. 80, no. 1, Winter 1994, pp. 61-95, Available at SSRN: https://ssrn.com/abstract=2125399

Jeffrey M. Lacker (Contact Author)

Federal Reserve Bank of Richmond ( email )

P.O. Box 27622
Richmond, VA 23261
United States
804-697-8279 (Phone)
804-697-8461 (Fax)

HOME PAGE: http://www.richmondfed.org

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