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Journal Article
Money market deposit accounts versus money market mutual funds
Lown, Cara S. (1987-11)
Economic and Financial Policy Review , Issue Nov , Pages 29-38

Speech
Money market mutual funds and stable funding
Rosengren, Eric S. (2013)
Remarks by Eric S. Rosengren, President and Chief Executive Officer, Federal Reserve Bank of Boston, at the Conference on Stable Funding, New York, New York, September 27, 2013.
Speech , Paper 74

Working Paper
Money Market Fund Vulnerabilities: A Global Perspective
Bouveret, Antoine; Martin, Antoine; McCabe, Patrick E. (2022-03-22)
Money market funds (MMFs) are popular around the world, with over $9 trillion in assets under management globally. From their origins in the 1970s, MMFs have operated in a niche between the capital markets and the banking system, as investment funds that offer private money‐like assets with features similar to those of bank deposits. Hence, they are vulnerable to runs that arise from liquidity transformation and from sudden changes in investor perceptions of the funds’ ability to serve as money‐like assets. Since 2000, MMF runs have occurred in many countries and under many regulatory ...
Finance and Economics Discussion Series , Paper 2022-012

Report
Money market funds intermediation, bank instability, and contagion
Cipriani, Marco; Parigi, Bruno; Martin, Antoine (2013)
In recent years, U.S. banks have increasingly relied on deposits from financial intermediaries, especially money market funds (MMFs), which collect funds from large institutional investors and lend them to banks. In this paper, we show that intermediation through MMFs allows investors to limit their exposure to a given bank (i.e., reap gains from diversification). However, since MMFs are themselves subject to runs from their own investors, a banking system intermediated through MMFs is more unstable than one in which investors interact directly with banks. A mechanism through which ...
Staff Reports , Paper 599

Briefing
A Small Contribution to Measuring the Lags in Monetary Policy Transmission
Wolman, Alexander L. (2023-09)
From May 2022 to July 2023, holdings of small CDs have risen from virtually nothing to more than $900 billion. While this is a dramatic increase, it has come on the heels of a sharp increase in interest rates, and the increase in CDs did not begin until well after interest rates started rising. In this article, I provide some historical perspective for the recent increase in CDs and retail money market mutual fund (MMMF) balances. What is the typical lag between market interest rate increases and increases in CD and MMMF balances? Is the recent increase unusually large, or does history ...
Richmond Fed Economic Brief , Volume 23 , Issue 30

Working Paper
Modelling Overnight RRP Participation
Huther, Jeff W.; Anderson, Alyssa G. (2016-02)
We examine how market participants have used the Federal Reserve?s overnight reverse repurchase (ON RRP) exercise and how short-term interest rates have evolved between December 2013 and November 2014. We show that money market fund (MMF) participation is sensitive to the spread between market repo rates and the ON RRP offering rate as well as Treasury bill issuance, government sponsored enterprise (GSE) participation is more heavily driven by calendar effects, dealers tend to only participate when rate spreads are negative, and banks generally do not participate. We also find that the effect ...
Finance and Economics Discussion Series , Paper 2016-023

Report
Competition, reach for yield, and money market funds
La Spada, Gabriele (2015-12-08)
Do asset managers reach for yield because of competitive pressures in a low-rate environment? I propose a tournament model of money market funds (MMFs) to study this issue. When funds care about relative performance, an increase in the risk premium leads funds with lower default costs to increase risk-taking, while funds with higher default costs decrease risk-taking. Without changes in the premium, lower risk-free rates reduce the risk-taking of all funds. I show that these predictions are consistent with MMF risk-taking during the 2002-08 period and that rank-based performance is indeed a ...
Staff Reports , Paper 753

Discussion Paper
The Premium for Money-Like Assets
Cipriani, Marco; La Spada, Gabriele (2018-07-18)
Several academic papers have documented investors? willingness to pay a premium to hold money-like assets and focused on its implications for financial stability. In a New York Fed staff report, we estimate such premium using a quasi-natural experiment, the recent reform of the money market fund (MMF) industry by the Securities and Exchange Commission (SEC).
Liberty Street Economics , Paper 20180718

Journal Article
The Money Market Mutual Fund Liquidity Facility
Anadu, Kenechukwu E.; Cipriani, Marco; Craver, Ryan M.; La Spada, Gabriele (2022-07-01)
In this article, the authors discuss the run on prime money market funds (MMFs) that occurred in March 2020, at the onset of the COVID-19 pandemic, and describe the Money Market Mutual Fund Liquidity Facility (MMLF), which the Federal Reserve established in response to it. They show that the MMLF, like a similarly structured Federal Reserve facility established during the 2008 financial crisis, was an important tool in stemming investor outflows from MMFs and restoring calm in short-term funding markets. The usage of the facility was higher by funds that suffered larger outflows. After the ...
Economic Policy Review , Volume 28 , Issue 1

Working Paper
Gates, Fees, and Preemptive Runs
Cipriani, Marco; Parigi, Bruno; Martin, Antoine; McCabe, Patrick E. (2014-04-03)
We build a model of a financial intermediary, in the tradition of Diamond and Dybvig (1983), and show that allowing the intermediary to impose redemption fees or gates in a crisis--a form of suspension of convertibility--can lead to preemptive runs. In our model, a fraction of investors (depositors) can become informed about a shock to the return of the intermediary's assets. Later, the informed investors learn the realization of the shock and can choose their redemption behavior based on this information. We prove two results: First, there are situations in which informed investors would ...
Finance and Economics Discussion Series , Paper 2014-30

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