Capital markets with greater information asymmetries are less efficient and can make crises worse, new research finds.

Illiquid lemon markets and the macroeconomy applies the work of George Akerlof on a macro scale. Akerlof famously explored the market for used cars, with sellers struggling to signal whether they owned a high-quality “peach” or low-quality “lemon”.

Authors Aimé Bierdel, Andres Drenik, Juan Herreño and Pablo Ottonello apply this insight to capital markets in their paper