Akerlof’s Lemons and Peaches in Azerbaijan Credit Market : Turning Lemons Into Lemonade Through Monetary Transmission Channels

The review of previous literature on Akerlof's lemons and peaches in the loan market provides extremely limited information. Our empirical study addressed the question of how monetary policy, through different transmission mechanism channels, influences the lemons and peaches in the credit market for Azerbaijan during 2006-2017. Based on the results of the VEC model, we found out that monetary policy through exchange rate, lending, and unexpected price level transmission mechanism channels negatively affects the lemons while they positively influence the peaches in the credit market of Azerbaijan. Empirical outcomes suggest the effectiveness of lending, unexpected price level, and exchange rate channel in terms of coping with lemons. It would be extremely engrossing to see which transmission mechanism channels are substitutes and which are complements to one another, based on which one can define whether the substitute or complement transmission channels are effective in terms of dealing with the lemons problem in the credit market