Money Market Funds: An Introduction to the Literature

Abstract

This article provides an overview of the literature on various aspects of the money market fund industry. It also serves as an introduction to a much larger research project on comparative regulation in the context of the global money market and cash management. The study of a relationship between MMFs and an efficient global financial market is in its early stages. Here we provide just a glimpse of the major driving forces behind the MMFs popularity.

The article examines studies related to funds’ investment management practices, but also explores a number of issues raised by the emerging money market fund industry under the securities and banking laws in the U.S. and Europe. An open question is whether the MMFs will continue to play an important role as one of the major cash management vehicles and a source of financing given certain structural deficiencies and unresolved regulatory issues. We hope that our further research will help to better understand the role of money market funds in more efficient functioning of the global financial markets and capital formation.

Keywords: Money, interest rates, money market, money market fund, investment management, liquidity

JEL Classification: E40, E49, E50, G18, G23, G28, N20, O16