How Effective Were the Federal Reserve Emergency Liquidity Facilities? Evidence from the Asset‐Backed Commercial Paper Money Market Mutual Fund Liquidity Facility

Duygan-Bump, Burcu; Parkinson, Patrick M.; Rosengren, Eric S.; Suárez, Gustavo; Willen, Paul S.

doi:10.1111/jofi.12011

Cited by 157 publications

(66 citation statements)

References 31 publications

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“…These results of the VECM are presented in columns 20 It can also be argued that the dynamic relationship among these variables may have also changed in 1994 given the changes in the MMF industry around that time period. We check whether there was a break in the cointegration vector in 1994 using Hanson (2002) method and we do not find a break in the cointegration vector in 1994.…”

Section: The Role Of the Recent Financial Crisismentioning

confidence: 99%

The dynamic relationship among the money market mutual funds, the commercial paper market, and the repo market

Rizi

Kishor

Marfatia

2018

The European Journal of Finance

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In this paper, we investigate the short-run and the long-run relationship among the financial assets of the money market funds, the commercial paper, and the repurchase agreement markets by undertaking a cointegration analysis of quarterly data over the 1985-2017 period. The evidence suggests that there exists a common long-term cointegrating trend among these three components of the shadow banking system. Any disequilibrium in this long-run relationship among these variables is corrected by movement in the financial assets of the money market funds. The Beveridge-Nelson decomposition from the estimated cointegrating relationship shows that the cyclical component in the money market funds is large and captures the huge swings in these markets during the financial crisis. Our results confirm the narrative evidence presented in Krishnamurthy et al. (2014), who argue that the short-term debt market investment opportunities in the form of the commercial paper and the repo market played a crucial role in the expansion of the balance sheet of the money market funds. JEL Classifications: E44, G01, G10, G21, C32.

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Section: The Role Of the Recent Financial Crisismentioning

confidence: 99%

The dynamic relationship among the money market mutual funds, the commercial paper market, and the repo market

Rizi

Kishor

Marfatia

2018

The European Journal of Finance

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“…One example of this was the run on money market funds after the Reserve Fund announced that it would no longer be able to pay a fixed net asset value to investors. Duygan- Bump et al (2013) describe the role that discount window lending played in reducing the liquidity problems generated by runs on the money market fund industry. Because money market funds were an important source of short-term financing, including to banks, this facility helped relieve liquidity problems beyond just the money market fund industry.…”

Section: Some Observations On Recent Eventsmentioning

confidence: 99%

The Role of Banks in the Transmission of Monetary Policy

Peek

Rosengren

2015

The Oxford Handbook of Banking, Second Edition

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may The Role of Banks in the Transmission of Monetary Policy Joe Peek and Eric S. Rosengren AbstractThe transmission of monetary policy, especially in light of recent events, has received increased attention, especially with respect to the efficacy of the bank lending channel. This paper summarizes the issues associated with isolating the bank lending channel and determining the extent to which it is operational. Evidence on the effectiveness of the bank lending channel is presented, both in the United States and abroad. The paper then provides observations about the likely consequences for the effectiveness of the lending channel of the changes in the financial environment associated with the recent financial crisis.

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“…One such facility was the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility AMLF, under which the Federal Reserve made nonrecourse loans to money funds investing in private commercial paper. This too had the effect of cushioning the negative impact of the financial and money market crisis on commercial paper issuance (see Duygan-Bump et al 2013). Another facility was the Commercial Paper Funding Facility (CPFF), under which the Federal Reserve bought A1/P1 rated commercial paper at interest rates that were 100 basis points above the option-indexed swap rate.…”

Section: Market-based Backstop Facilitiesmentioning

confidence: 99%

Real Estate and the Great Crisis: Lessons for Macro-Prudential Policy

2016

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractFrom a broad macro-financial structure perspective, overly easy credit conditions gave rise to house price booms and busts in several advanced economies (e.g., Ireland, Spain, and the U.S.), and, more specifically in the U.S., an underpricing of risk made possible by regulatory arbitrage and shadow financing fueled the credit and twin real estate bubbles of the mid2000s. Across countries and over time bubbles have been particularly acute in real estate markets reflecting not only the relatively inelastic supply of land and thin trading of real estate, but also the amplification of shocks via backward-looking price expectations and the funding of consumption off distorted and elevated prices. The macro-prudential lessons from the Great Crisis highlight the need to prevent the build-up of excess real estate financing and limit the amplification and correlation of real estate risks. And progress has been made in each of these areas through imposing tougher or new restrictions on the choice sets of lenders or of borrowers, with particulars varying across advanced economies. While regulatory reform of banking is going forward, significant challenges remain especially in dealing with correlated risks associated with securitization.

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How Effective Were the Federal Reserve Emergency Liquidity Facilities? Evidence from the Asset‐Backed Commercial Paper Money Market Mutual Fund Liquidity Facility

Cited by 157 publications

References 31 publications

The dynamic relationship among the money market mutual funds, the commercial paper market, and the repo market

The dynamic relationship among the money market mutual funds, the commercial paper market, and the repo market

The Role of Banks in the Transmission of Monetary Policy

Real Estate and the Great Crisis: Lessons for Macro-Prudential Policy

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