Sturm und Drang in money market funds: when money market funds cease to be narrow
AbstractThis paper investigates the returns and flows of German money market funds before and during the liquidity crisis of 2007/2008. The main findings of this paper are: In liquid times money market funds enhanced their returns by investing in less liquid papers. By doing so they outperformed other funds as long as liquidity in the market was high. Investing in less liquid assets, however, widens the narrow structure of money market funds and makes them vulnerable to runs. During the shortening of liquidity caused by the subprime crisis illiquid funds experienced runs, while more liquid funds functioned as a safe haven. --
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Bibliographic InfoPaper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 2: Banking and Financial Studies with number 2008,20.
Date of creation: 2008
Date of revision:
Money market funds; liquidity crisis; strategic complementarities; runs; narrow banking;
Other versions of this item:
- Jank, Stephan & Wedow, Michael, 2010. "Sturm und Drang in money market funds: When money market funds cease to be narrow," CFR Working Papers 10-16, University of Cologne, Centre for Financial Research (CFR).
- G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
- G20 - Financial Economics - - Financial Institutions and Services - - - General
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
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.:
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CFR Working Papers
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