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The demand for money market mutual funds

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Author Info
Kauko , Karlo () (Bank of Finland Research)
Abstract

This paper presents a model on the demand for money market funds (MMFs). These funds are a very close substitute for M1 deposits, except that MMFs do not satisfy immediate transaction requirements. The demand for MMFs strengthens when the intended volume of transactions is low. A high interest rate level makes it expensive to hold M1 deposits. High interest rate volatility, paradoxically, increases the risk of holding M1 deposits stronger than the risk of holding MMFs. The results are largely corroborated by Finnish data.

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File URL: http://www.bof.fi/NR/rdonlyres/135DF003-1E15-4F83-A483-A64032E03431/0/0514netti.pdf
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Publisher Info
Paper provided by Bank of Finland in its series Research Discussion Papers with number 14/2005.

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Length: 32 pages
Date of creation: 11 Jul 2005
Date of revision:
Handle: RePEc:hhs:bofrdp:2005_014

Contact details of provider:
Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland
Web page: http://www.bof.fi/en/tutkimus
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Related research
Keywords: money market mutual funds; money demand;

Find related papers by JEL classification:
E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
G23 - Financial Economics - - Financial Institutions and Services - - - Pension Funds; Other Private Financial Institutions
G29 - Financial Economics - - Financial Institutions and Services - - - Other

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. William N. Goetzmann & Massimo Massa & K. Geert Rouwenhorst, 2000. "Behavioral Factors in Mutual Fund Flows," Yale School of Management Working Papers ysm135, Yale School of Management. [Downloadable!]
    Other versions:
  2. James P. Dow, Jr. & Douglas W. Elmendorf, 1998. "The effect of stock prices on the demand for money market mutual funds," Finance and Economics Discussion Series 1998-24, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  3. Kerstin Bernoth & Jürgen von Hagen, 2004. "The Euribor Futures Market: Efficiency and the Impact of ECB Policy Announcements," International Finance, Blackwell Publishing, vol. 7(1), pages 1-24, 03. [Downloadable!] (restricted)
  4. Farinella, Joseph A. & Koch, Timothy W., 1999. "The Demand for Taxable and Tax-Exempt Money Market Mutual Funds," Journal of Macroeconomics, Elsevier, vol. 21(2), pages 335-353, April. [Downloadable!] (restricted)
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