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The price of liquidity: CD rates charged by money market funds

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  • Whitledge, Matthew D.
  • Winters, Drew B.

Abstract

We examine the cost of liquidity in rates on CDs purchased by money market funds (MMFs). We find no evidence that rates vary directly with the size of CDs. However, we do find that large MMFs receive higher rates on large CDs than small MMFs. This suggests banks pay for (potential) liquidity.

Suggested Citation

  • Whitledge, Matthew D. & Winters, Drew B., 2015. "The price of liquidity: CD rates charged by money market funds," Journal of Banking & Finance, Elsevier, vol. 54(C), pages 104-114.
    • Handle: RePEc:eee:jbfina:v:54:y:2015:i:c:p:104-114
    DOI: 10.1016/j.jbankfin.2015.01.016
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    Cited by:

    1. Srinivas Nippani & Ran Ling, 2021. "Bank size and performance: An analysis of the industry in the United States in the post‐financial‐crisis era," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 44(3), pages 587-606, September.
    2. Allen, Kyle D. & Winters, Drew B., 2020. "Crisis regulations: The unexpected consequences of floating NAV for money market funds," Journal of Banking & Finance, Elsevier, vol. 117(C).
    3. Allen, Kyle & Saha, Pritam & Whitledge, Matthew & Winters, Drew, 2023. "Money market reforms:The effect on the commercial paper market," Journal of Banking & Finance, Elsevier, vol. 154(C).
    4. Allen, Kyle D. & Whitledge, Matthew D. & Winters, Drew B., 2022. "Community bank liquidity: Natural disasters as a natural experiment," Journal of Financial Stability, Elsevier, vol. 60(C).

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    More about this item

    Keywords

    Liquidity; CDs; Money market funds;
    All these keywords.

    JEL classification:

    • G19 - Financial Economics - - General Financial Markets - - - Other
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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