A model of stigma in the fed funds market

It is often the case that banks in the US are willing to borrow in the fed funds market (the interbank market for funds) at higher rates than the ones they could obtain by borrowing at the Fed's discount window. This phenomenon is commonly explained as the consequence of the existence of a stigma effect attached to borrowing from the window. Most policymakers and empirical researchers consider the stigma hypothesis plausible. Yet, no formal treatment of the issue has ever been provided in the literature. In this paper, we fill that gap by studying a model of interbank credit where: (1) banks benefit from engaging in intertemporal trade with other banks and with outside investors; and (2) informational frictions limit those trade opportunities. In our model, banks obtain loans in an over-the-counter market (involving search, bilateral matching, and negotiations over the terms of the loan) and hold assets of heterogeneous qualities which in turn determine their ability to repay those loans. When asset quality is not perfectly unobservable by outside investors, information about the actions taken by a bank in the credit market may influence the price at which it can sell its asset. In particular, under some conditions, discount window borrowing may be regarded as a negative signal about the quality of the borrower's assets. In such cases, some of the banks in our model, just as in the data, are willing to accept loans in the interbank market at higher rates than the ones they could obtain at the discount window.Interbank market, Private information, Signaling, Banking

On Search Theory and Customers

This paper studies a simple model of decentralized exchange where consumers have to search for a seller that provides the services they want. Once a buyer finds one of these “good” stores, a customer relationship between the two develops. We study the factors on which the formation of this link depends and some of their properties and characteristics. We define a Customers Steady State Equilibrium and give conditions under which one of these exists. Finally, we show how these customer relationships impose a certain sluggishness on the economy as it responds to changes in the cost of production.

Severe role impairment associated with mental disorders: results of the WHO World Mental Health Surveys International College Student Project

BACKGROUND: College entrance is a stressful period with a high prevalence of mental disorders. AIMS: To assess the role impairment associated with 12-month mental disorders among incoming first-year college students within a large cross-national sample. METHODS: Web-based self-report surveys assessing the prevalence of DSM-IV mental disorders and health-related role impairment (Sheehan Disability Scale) were obtained and analyzed from 13,984 incoming first-year college students (Response = 45.5%), across 19 universities in eight countries. Impairment was assessed in the following domains: home management, work (e.g., college-related problems), close personal relationships, and social life. ESULTS: Mean age of the sample was 19.3 (SD = 0.59) and 54.4% were female. Findings showed that 20.4% of students reported any severe role impairment (10% of those without a mental disorder vs. 42.9% of those with at least one disorder, P < 0.01). In bivariate analyses, panic disorder, and mania were associated most frequently with severe impairment (60.6% and 57.5%, respectively). Students reporting three or more mental disorders had almost fivefold more frequently severe impairment relative to those without mental disorders. Multiple logistic regression showed that major depression (OR = 4.0; 95%CI = 3.3, 4.8), generalized anxiety (OR = 3.9; 95%CI = 3.1, 4.8), and panic disorder (OR = 2.9; 95%CI 2.4, 4.2) were associated with the highest odds of severe impairment. Only minimal deviations from these overall associations were found across countries. CONCLUSION: Mental disorders among first-year college students are associated with substantial role impairment. Providing preventative interventions targeting mental disorders and associated impairments is a critical need for institutions to address