Philadelphia Fed paper investigates price discovery
A working paper published yesterday by the Federal Reserve Bank of Philadelphia considers whether government can repair the process of price discovery when it is disrupted in a "frozen" market.
The paper – Subsidising Price Discovery, by Braz Camargo, Kyungmin Kim and Benjamin Lester – examines the ability of a government to restore the process of price discovery by providing partial insurance against acquiring low-quality assets.
While such a programme "can encourage buyers to bid for assets"
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