Monetary Policy Transmission and the Size of the Money Market Fund Industry: An Update

Gara Afonso, Catherine Huang, Marco Cipriani, Abduelwahab Hussein and Gabriele La Spada

No 20230403, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: The size of the money market fund (MMF) industry co-moves with the monetary policy cycle. In a post published in 2019, we showed that this co-movement is likely due to the stronger response of MMF yields to monetary policy tightening relative to bank deposit rates, combined with MMF shares and bank deposits being close substitutes from an investor’s perspective. In this post, we update the analysis and zoom in to the current monetary policy tightening by the Federal Reserve.

Keywords: bank deposits; Beta; Effective Federal Funds Rate (EFFR); money market funds; monetary policy (search for similar items in EconPapers)
JEL-codes: E52 G1 G2 (search for similar items in EconPapers)
Date: 2023-04-03
New Economics Papers: this item is included in nep-ban and nep-mon
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