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Central Bank Access and Flight to Safety

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Abstract

We examine whether access to the Federal Reserve's Overnight Reverse Repo Facility (ON RRP) affects money market fund flows during flight-to-safety episodes. We find that funds with ON RRP access serving sophisticated investors experience about a 1 percentage point increase in net daily flows over total assets during the March 2020 flight-to-safety episode relative to similar funds without access. The effect aligns with theoretical predictions and explains more than half of the inflows in those funds. Our results show that access to central bank deposit facilities amplifies flight-to-safety behavior.

Suggested Citation

  • Lucia Gurrieri & Chase P. Ross & Ben Schmiedt & Alexandros Vardoulakis & Vladimir Yankov, 2025. "Central Bank Access and Flight to Safety," Finance and Economics Discussion Series 2025-100, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:2025-100
    DOI: 10.17016/FEDS.2025.100
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    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

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