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Asset price bubbles and systemic risk in money market funds

Author

Listed:
  • Matteo Aquilina
  • Peter Cincinelli
  • Giovanni Urga

Abstract

We investigate the systemic risk contribution of 3,500 Money Market Funds (MMFs) in normal periods and during asset price bubbles in the US from January 2004 to December 2022. Using state-of-the-art statistical techniques for bubble detection and granular fund-level data, we show that MMF characteristics significantly influence systemic risk. Large MMFs and government MMFs, which invest exclusively in US Treasury securities, are associated with reduced systemic risk, while prime MMFs contribute to higher systemic risk. MMFs denominated in US dollars but domiciled offshore exhibit no significant differences from their US-domiciled counterparts.

Suggested Citation

  • Matteo Aquilina & Peter Cincinelli & Giovanni Urga, 2026. "Asset price bubbles and systemic risk in money market funds," BIS Working Papers 1358, Bank for International Settlements.
    • Handle: RePEc:bis:biswps:1358
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    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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