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liq [111]
3 years ago
5

Why do bank panics worsen asymmetric information problems in credit markets?

Business
1 answer:
slava [35]3 years ago
5 0
Bank panics lead to various problems such as fear among the depositors for their safety of money deposited and decline in the assets of the bank.

Bank panic worsen asymmetric information problems in credit markets because  IF A BANK FACES LOSS IT CANNOT RESOLVE AND MANAGE THE ASYMMETRIC INFORMATION PROBLEMS. THIS WORSENS THE ASYMMETRIC INFORMATION PROBLEM IN THE CREDIT MARKETS.
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