Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/240343 
Year of Publication: 
2021
Series/Report no.: 
Bank of Finland Research Discussion Papers No. 2/2021
Publisher: 
Bank of Finland, Helsinki
Abstract: 
An asset is money-like if investors have no incentives to acquire costly private information on the underlying collateral. However, privately provided money-like assets-like prime money market fund (MMF) shares-are prone to runs if investors suddenly start to question the value of the collateral. Therefore, for risky assets, lack of money-likeness is a necessary condition for lack of run incentives. But is it a sufficient one? This paper studies the effect of the U.S. money market fund reform of 2014-2016 on investor monitoring, money-likeness and stability of institutional prime MMFs. Using the number of distinct IP addresses accessing MMFs' regulatory reports as a proxy for investor monitoring, we find that the reform increased monitoring and thus decreased money-likeness of institutional prime funds. However, we also show that after the reform, institutional prime funds that are more likely to impose the newly introduced redemption restrictions are more monitored, suggesting that investors may monitor in order to avoid being hit by the restrictions. Overall, our results indicate that increased monitoring, or decreased money-likeness, has not made institutional prime MMFs run-free, and it may have actually created a new source of fragility for MMFs.
Subjects: 
Money market funds
money markets
money market fund reform
money-likeness
information sensitivity
monitoring
JEL: 
G01
G23
G28
Persistent Identifier of the first edition: 
ISBN: 
978-952-323-366-9
Document Type: 
Working Paper

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