Liquidity and shadow banking

Zary Aftab and Simone Varotto ()

Journal of International Money and Finance, 2019, vol. 99, issue C

Abstract: Using a unique dataset of the detailed portfolio holdings of US money market funds, we study the behaviour of such funds in the context of the European sovereign debt crisis. These important players in the shadow banking sector were particularly vulnerable to liquidity shocks before the introduction of minimum liquidity requirements. We analyse the impact of these requirements and show that they have considerably increased the resilience of prime funds. We also see that prime funds increase their liquidity to counter expected investors’ redemptions in crisis periods. However, liquidity does not shelter risky funds from lower inflows.

Keywords: Sovereign debt crisis; Shadow banking; Liquidity; Money market fund; Financial regulation (search for similar items in EconPapers)
JEL-codes: G01 G23 G28 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:99:y:2019:i:c:s0261560619304693

DOI: 10.1016/j.jimonfin.2019.102080

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