Fragility in money market funds: Sponsor support and regulation

• 成果类型: Article
• 署名作者: Parlatore, Cecilia
• 署名单位: New York University
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2016.05.004
• 发表日期: 2016
• 页码: 595-623
• 关键词: Fragility; Money market funds; Sponsor support; regulation; liquidity

摘要

Money market funds (MMFs), which are crucial to short-term funding markets, rely on voluntary support of fund sponsors to maintain stable share values. I develop a general equilibrium model of MMFs to study how sponsor support affects the industry's fragility and regulation. Adverse asset-quality shocks lead MMFs to liquidate assets. When liquidity in asset markets is limited, asset prices are lower if more funds liquidate. Lower asset prices, in turn, make sponsor support costlier and even more liquidations occur. This feedback leads to complementarities in sponsors' support decisions. Based on the model's insights, I derive implications for the regulation of MMFs. (C) 2016 Elsevier B.V. All rights reserved.