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The demand for money market mutual funds

Karlo Kauko

No 14/2005, Research Discussion Papers from Bank of Finland

Abstract: This paper presents a model on the demand for money market funds (MMFs).These funds are a very close substitute for M1 deposits, except that MMFs do not satisfy immediate transaction requirements. The demand for MMFs strengthens when the intended volume of transactions is low.A high interest rate level makes it expensive to hold M1 deposits.High interest rate volatility, paradoxically, increases the risk of holding M1 deposits stronger than the risk of holding MMFs.The results are largely corroborated by Finnish data. Key words: money market mutual funds, money demand JEL classification numbers: G23, G29, E41

JEL-codes: G23 G29 E41 (search for similar items in EconPapers)
Date: 2005-05-05
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