Sturm und Drang in money market funds: When money market funds cease to be narrow

Stephan Jank and Michael Wedow

No 10-16, CFR Working Papers from University of Cologne, Centre for Financial Research (CFR)

Abstract: This paper investigates the returns and flows of German money market funds before and during the liquidity crisis of 2007/2008. The main findings of this paper are: in liquid times, money market funds enhanced their returns by investing in less liquid papers. By doing so they outperformed other funds as long as liquidity in the market was high. Investing in less liquid assets, however, widens the narrow structure of money market funds and makes them vulnerable to runs. During the shortening of liquidity caused by the subprime crisis, illiquid funds experienced runs, while more liquid funds functioned as a safe haven.

Keywords: Money Market Funds; Liquidity Crisis; Strategic Complementarities; Runs; Narrow Banking (search for similar items in EconPapers)
JEL-codes: G12 G20 G21 (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-ban, nep-mon and nep-mst
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Citations: View citations in EconPapers (8)

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https://www.econstor.eu/bitstream/10419/41383/1/637050932.pdf (application/pdf)

Related works:
Journal Article: Sturm und Drang in money market funds: When money market funds cease to be narrow (2015)
Working Paper: Sturm und Drang in money market funds: when money market funds cease to be narrow (2008)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cfrwps:1016

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