credit crisis, interbank market lending, information economics?
Friday, March 19th, 2010mhb_valentine asked:
Well, during the current credit crisis, lending on the interbank market nearly came to a halt because Banks did not trust lending to each other.
Well, during the current credit crisis, lending on the interbank market nearly came to a halt because Banks did not trust lending to each other.
So can someone use information economics to improve my understanding of what happened?
We’ve seen a possible solution to the problem is having the government provide guarantees for loans in the interbank market. But what are the limits of this approach, again, in the light of information economics?