Money Market Fund Vulnerabilities: A Global Perspective

Antoine Bouveret (), Antoine Martin and Patrick E. McCabe
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Patrick E. McCabe: https://www.federalreserve.gov/econres/patrick-e-mccabe.htm

No 1009, Staff Reports from Federal Reserve Bank of New York

Abstract: Money market funds (MMFs) are popular around the world, with over $9 trillion in assets under management globally. From their origins in the 1970s, MMFs have operated in a niche between the capital markets and the banking system, as investment funds that offer private money-like assets with features similar to those of bank deposits. Hence, they are vulnerable to runs that arise from liquidity transformation and from sudden changes in investor perceptions of the funds’ ability to serve as money-like assets. Since 2000, MMF runs have occurred in many countries and under many regulatory regimes. The global pattern of runs and crises shows that MMF vulnerabilities are not unique to a particular set of governing arrangements, and that mitigating these vulnerabilities requires fundamental reforms that either place MMFs more clearly within the investment-fund sector or establish protections for MMFs similar to those for deposits.

Keywords: money market funds; liquidity transformation; runs; nonbank financial institutions; short-term funding markets; information-insensitive assets; financial stability (search for similar items in EconPapers)
JEL-codes: G20 G23 G28 (search for similar items in EconPapers)
Pages: 28
Date: 2022-03-01
New Economics Papers: this item is included in nep-ban, nep-cba, nep-cwa, nep-fmk, nep-ifn and nep-mon
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Citations: View citations in EconPapers (6)

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