The demand for money market mutual funds
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.
|Date of creation:||11 Jul 2005|
|Date of revision:|
|Contact details of provider:|| Postal: Bank of Finland, P.O. Box 160, FI-00101 Helsinki, Finland|
Web page: http://www.suomenpankki.fi/en/
More information through EDIRC
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.:
- 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.
- Massimo Massa & William Goetzmann & K. Rouwenhorst, 2000.
"Behavioral Factors in Mutual Fund Flows,"
Yale School of Management Working Papers
ysm8, Yale School of Management, revised 01 Jan 2001.
- Domian, Dale L. & Reichenstein, William, 1997. "Performance and persistence in money market fund returns," Financial Services Review, Elsevier, vol. 6(3), pages 169-183.
- Maggs, Gary E., 1991. "Depository disintermediation and the equilibrium quantity of money market mutual funds," Journal of Economics and Business, Elsevier, vol. 43(3), pages 253-263, August.
- Lam, Chun H. & Deb, Rajat & Fomby, Tom, 1989. "Deregulation and the demand for money market mutual funds," Journal of Macroeconomics, Elsevier, vol. 11(2), pages 297-308.
- Kerstin Bernoth & Jürgen von Hagen, 2004. "The Euribor Futures Market: Efficiency and the Impact of ECB Policy Announcements," International Finance, Wiley Blackwell, vol. 7(1), pages 1-24, 03.
- James Dow & 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.).
When requesting a correction, please mention this item's handle: RePEc:hhs:bofrdp:2005_014. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Minna Nyman)
If references are entirely missing, you can add them using this form.