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The Money Market Fund Liquidity Facility

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Abstract

Over the first three weeks of March, as uncertainty surrounding the COVID-19 pandemic increased, prime and municipal (muni) money market funds (MMFs) faced large redemption pressures. Similarly to past episodes of industry dislocation, such as the 2008 financial crisis and the 2011 European bank crisis, outflows from prime and muni MMFs were mirrored by large inflows into government MMFs, which have historically been seen by investors as a safe haven in times of crisis. In this post, we describe a liquidity facility established by the Federal Reserve in response to these outflows.

Suggested Citation

  • Marco Cipriani & Gabriele La Spada & Reed Orchinik & Aaron Plesset, 2020. "The Money Market Fund Liquidity Facility," Liberty Street Economics 20200508, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:87925
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    Cited by:

    1. Marco Cipriani & Gabriele La Spada, 2020. "Sophisticated and Unsophisticated Runs," Staff Reports 956, Federal Reserve Bank of New York.
    2. Andrew F. Haughwout & Benjamin Hyman & Or Shachar, 2021. "The Option Value of Municipal Liquidity: Evidence from Federal Lending Cutoffs during COVID-19," Staff Reports 988, Federal Reserve Bank of New York.

    More about this item

    Keywords

    Money Market Mutual Fund Liquidity Facility (MMLF); pandemic; COVID-19;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services

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