Navigating liquidity crises in non-banks: An assessment of central bank policies

Johannes Breckenfelder and Marie Hoerova

Research Bulletin, 2023, vol. 108

Abstract: Are central bank tools effective in reaching non-banks with no access to the lender of last resort facilities? Using runs on mutual funds in March 2020 as a laboratory, we show that, following the announcement of large-scale asset purchases, funds with higher ex ante shares of assets eligible for central bank purchases saw their performance improve by 3.6 percentage points and outflows decrease by 61% relative to otherwise similar funds. Following central bank liquidity provision to banks, the growth rate of repo lending to funds by banks more exposed to the system-wide liquidity crisis was up to five times higher compared with other banks. JEL Classification: E58, G01, G10, G21, G23

Keywords: asset purchases; COVID-19 liquidity crisis; Investment funds; lender of last resort; market-maker of last resort (search for similar items in EconPapers)
Date: 2023-06
Note: 1125999
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