Liquidity and shadow banking

Research output: Contribution to journalArticle

Authors

External departments

  • University of Reading

Details

Original languageEnglish
Article number102080
Number of pages23
JournalJournal of International Money and Finance
Volume99
Early online date30 Aug 2019
DOIs
Publication statusPublished - 1 Dec 2019
Publication type

Research output: Contribution to journalArticle

Abstract

Using a unique dataset of the detailed portfolio holdings of US money market funds, we study the behaviour of such funds in the context of the European sovereign debt crisis. These important players in the shadow banking sector were particularly vulnerable to liquidity shocks before the introduction of minimum liquidity requirements. We analyse the impact of these requirements and show that they have considerably increased the resilience of prime funds. We also see that prime funds increase their liquidity to counter expected investors’ redemptions in crisis periods. However, liquidity does not shelter risky funds from lower inflows.