My column in the Business Standard today is Worry about middle India.
Mutual funds that invest in debt securities have a problem, a mismatch between the liquidity of their liabilities and the illiquidity of the corporate bond market. This creates the danger of runs on mutual funds. Harsh Vardhan proposes a `Cooperative Liquidity Window’, through which a group of mutual funds can create a novel institution that helps address liquidity black holes. Josh Felman and I disagree, we think this will not work.
On The Leap Blog today, we have an article A cooperative liquidity window for mutual funds: A debate where both sides put forward their views. The article text is a cooperative equilibrium, in that both sides had unlimited passes of reviewing the argument of the other side and strengthening their text.