NY Fed paper highlights money market fund ‘stampede’ risk
Intermediation by money market funds (MMFs) can turn an unexpected investor withdrawal into a systemic banking crisis, according to a staff report published by the Federal Reserve Bank of New York in February.
MMFs are highly popular in the US, allowing investors to diversify exposures to banks. But authors Marco Cipriani, Antoine Martin and Bruno Parigi find this is a significant source of risk, as MMFs are very sensitive to changes in liquidity. In 2008 when an MMF's net asset value fell below
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