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Money Market Fund Vulnerabilities: A Global Perspective

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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.

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  • Antoine Bouveret & Antoine Martin & Patrick E. McCabe, 2022. "Money Market Fund Vulnerabilities: A Global Perspective," Staff Reports 1009, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednsr:93851
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    Cited by:

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    2. Aikman, David & Beale, Daniel & Brinley-Codd, Adam & Covi, Giovanni & Hüser, Anne‑Caroline & Lepore, Caterina, 2023. "Macroprudential stress‑test models: a survey," Bank of England working papers 1037, Bank of England.
    3. Xiaole Tong & Jingfei Wang, 2023. "Does the Development of Money Market Funds in China Increase the Bank Liquidity Risk?," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 13(1), pages 1-7.

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    More about this item

    Keywords

    money market funds; liquidity transformation; runs; nonbank financial institutions; short-term funding markets; information-insensitive assets; financial stability;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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