•The Covid-19 Pandemic has increased the attention paid to money market funds.•Using Covid Intensity measures we analyze how MMF mangers and investors responded to the Pandemic.•MMF managers ...shortened the weighted average life of their funds and increased daily liquidity.•As uncertainty was decreased through Fed intervention, investors flowed into prime funds.
The Covid-19 Pandemic has increased the attention paid to money market funds. Using Covid-19 cases and a measure of lockdowns, shutdowns, etc., we analyze if money market fund investors and managers responded to the intensity of the pandemic. We ask whether or not the Federal Reserve implementation of the Money Market Mutual Fund Liquidity Facility (MMLF) had an effect on market participant behavior. We find that institutional prime investors responded significantly to the MMLF. Fund managers responded to the intensity of the pandemic but largely ignored the reduction in uncertainty created by the implementation of the MMLF.
We replicate the analysis of Sebastian Galiani and Ernesto Shargrodsky's (GS) influential 2010 article 'Property rights for the poor: effects of land titling'. GS use a natural experiment in a poor ...urban area of Buenos Aires to find that land titling increases housing investment, reduces household size, and increases child education, but does not do so through increased use of credit. The original questionnaires and raw data are not available and the existing variables provided by GS allow only a limited replication analysis. Despite these limitations, we successfully reproduce the original findings published by GS, and find these results are robust to alternative specifications. We also find heterogeneous effects regarding gender and education level of the original squatter.
Celotno besedilo
Dostopno za:
BFBNIB, DOBA, IZUM, KILJ, NUK, PILJ, PNG, SAZU, UILJ, UKNU, UL, UM, UPUK
The money market rates in the United States exhibit various calendar patterns that are grounded in institutional and regulatory factors. In this paper, we document a new regularity in the overnight ...fed funds market. Specifically, we identify patterns of decreased volatility along with consistent and significant month-end rate drops in the fed fund rates. Our findings suggest that short-term liquidity requirements of the Basel III reforms are, in part, responsible for the regularity in fed funds.
We examine the cost of liquidity in rates on CDs purchased by money market funds (MMFs). We find no evidence that rates vary directly with the size of CDs. However, we do find that large MMFs receive ...higher rates on large CDs than small MMFs. This suggests banks pay for (potential) liquidity.
•One purpose of the Dodd-Frank Act is to eliminate Too-Big-to-Fail (TBTF) banks.•We examine banks in special groups vs. banks not identified for special attention.•Special banks lean toward a ...positive reaction to the elimination of TBTF.•Banks not identified for special attention leaned toward a negative reaction.•Our results suggest that Dodd-Frank do not eliminate TBTF.
One feature of the Dodd-Frank Act is the elimination of too-big-to-fail (TBTF) banks. TBTF is a government guarantee of large banks that has been shown to increase the value of these banks, so removing the guarantee should result in a price decline of TBTF bank stock. Using event study methods, we find very limited reaction to the process of eliminating TBTF. Specifically, there is limited reaction among the largest banks and banks receiving special attention, such as Systemically Important Financial Institutions (SIFI) banks. Instead, smaller banks not receiving special attention show some evidence of negative returns with the elimination of TBTF.
We use an E-GARCH model to estimate the wealth effects of Federal Reserve lending during the financial crisis to Investment banks (I-Banks), “Too Big to Fail” (TBTF) banks, and “traditional” ...commercial banks. Borrowing from the Term Auction Facility program has negative wealth effects for all banks and I-banks in particular. We also find that the market view of the liquidity programs changed across the sample sub-periods. I-Bank and TBTF bank borrowing from the discount window is initially viewed positively, however continued use of the discount window and the Term Auction Facility was generally (though not universally) viewed negatively. Commercial Paper Funding Facility program participation is consistently positive only for traditional banks and programs that focus on the purchase of specific securities (e.g., commercial paper) to address specific problems also appear to primarily benefit traditional banks. The inconsistency of results across the time periods of the crisis is telling as market participants struggled to discern what access to these programs meant.
Term auction facility (TAF) was created during the financial crisis as a substitute for the Federal Reserve’s discount window, the lender of last resort. We hypothesize if TAF borrowing is viewed as ...a bailout then publicly traded banks would borrow relatively fewer TAF funds to avoid a bailout stigma. We find publicly traded banks did borrow less (as a percent of total assets) in the TAF program than privately held banks. Further, too-big-to-fail banks and investment banks borrowed relatively less than other publicly traded banks indicating greater levels of public scrutiny reduces borrowing under emergency government liquidity programs. We also find that publicly traded banks pledged lower quality and less liquid collateral than private banks when borrowing under the program. Our results suggest TAF provided more benefit to traditional privately held banks with strong balance sheets that were able to borrow relatively greater amounts in anticipation of either future liquidity needs as suggested by Ivashina and Scharfstein (J Financ Econ 97:319–338,
2010
) or increased lending as found by Berger et al. (The Federal Reserve’s discount window and TAF programs: “pushing on a string?” Working paper, University of South Carolina,
2014
).
There are three main reasons banks may not be lending. First, banks could be rationing credit. We show that banks have excess reserves of more than $2 trillion, so demand exceeding supply is ...unlikely. Second, banks could be experiencing a capital crunch. We find no evidence of a capital crunch. Third, banks could be choosing to restrict lending, creating a credit crunch. We find that postcrisis loan growth rates are lower than crisis loan growth rates, but postcrisis loan growth is similar to precrisis growth. We find no evidence to suggest that banks are systematically restricting lending.
► Provide an understanding of the AMLF program and all the players. ► The design of AMLF allows for risk transfers and self-dealing. ► Results suggest self-dealing by six of the seven participating ...institutions.
The Federal Reserve’s AMLF program was designed to provide liquidity to money market funds (MMFs). Between September 2008 and May 2009, the program made $217 billion in non-recourse loans to depository institutions and bank holding companies to purchase asset-backed commercial paper from MMFs. JP Morgan and State Street dominated the program, accounting for over 90% of all loans made. Our analysis suggests that JP Morgan exhibited more self-dealing behavior than State Street. We find that JP Morgan and State Street earned economically and statistically significant cumulative returns of 2.28% and 2.49% (respectively) over the first seven days of the program after controlling for market returns and heteroscedasticity.
This paper provides empirical evidence on the economic value of services provided by independent auditors by analyzing whether auditor association leads to reduced interest rates on revolving credit ...agreements. The relation between interest rates on revolving bank loans to small, private firms and the degree of auditor association with the financial statements provided to the lender, controlling for other potentially important firm and loan characteristics is analyzed using multivariate regressions. It is found, on average, that firms purchasing audits pay lower interest rates after controlling for firm-specific risk factors and relevant loan characteristics, and that the marginal interest rate benefit of an audit is inversely related to firm size.
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