Discussion Paper
The Transmission of Monetary Policy and the Sophistication of Money Market Fund Investors
Abstract: In December 2015, the Federal Reserve tightened monetary policy for the first time in almost ten years and, over the following three years, it raised interest rates eight more times, increasing the target range for the federal funds rate from 0-25 basis points (bps) to 225-250 bps. To what extent are changes in the fed funds rate transmitted to cash investors, and are there differences in the pass-through between retail and institutional investors? In this post, we describe the impact of recent rate increases on the yield paid by money market funds (MMFs) to their investors and show that the impact varies depending on investors? sophistication.
Keywords: money market funds; pass-through entities; monetary policy; investor sophistication;
JEL Classification: G2;
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Bibliographic Information
Provider: Federal Reserve Bank of New York
Part of Series: Liberty Street Economics
Publication Date: 2019-09-04
Number: 20190904