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

59 Pages Posted: 2 May 2010 Last revised: 22 Feb 2012

See all articles by Burcu Duygan-Bump

Burcu Duygan-Bump

Federal Reserve Board

Patrick M. Parkinson

Government of the United States of America - Division of Research and Statistics

Eric S. Rosengren

Federal Reserve Bank of Boston - Supervision and Regulation

Gustavo Suarez

Board of Governors of the Federal Reserve System

Paul Willen

Federal Reserve Bank of Boston - Research Department; National Bureau of Economic Research (NBER)

Date Written: February 21, 2012

Abstract

The events following Lehman’s failure in 2008 and the current turmoil emanating from Europe highlight the structural vulnerabilities of short-term credit markets and the role of central banks as back-stop liquidity providers to financial markets. The Federal Reserve’s response to financial disruptions in the United States importantly included creating liquidity facilities. Using unique micro datasets and a differences-in-differences approach, we evaluate one of the most unusual of these interventions — the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility. Our findings indicate that this facility helped stabilize asset outflows from money market funds and reduced asset-backed commercial paper yields significantly.

Keywords: Federal Reserve, Financial Crisis, Discount Window, Money Market Mutual Funds, Commercial Paper, Asset-Backed Commercial Paper

JEL Classification: E58, G01, G20

Suggested Citation

Duygan-Bump, Burcu and Parkinson, Patrick M. and Rosengren, Eric S. and Suarez, Gustavo and Willen, Paul S., How Effective Were the Federal Reserve Emergency Liquidity Facilities? Evidence from the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (February 21, 2012). Journal of Finance, Forthcoming; FRB of Boston Quantitative Analysis Unit Working Paper No. 10-3. Available at SSRN: https://ssrn.com/abstract=1596677

Burcu Duygan-Bump (Contact Author)

Federal Reserve Board ( email )

20th and C Streets, N.W.
Washington, DC 20551
United States
2029124663 (Phone)

Patrick M. Parkinson

Government of the United States of America - Division of Research and Statistics

20th and C Streets, NW
Washington, DC 20551
United States

Eric S. Rosengren

Federal Reserve Bank of Boston - Supervision and Regulation ( email )

600 Atlantic Avenue
P.O. Box 2076
Boston, MA 02210
United States
617-973-3090 (Phone)
617-973-3219 (Fax)

Gustavo Suarez

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Paul S. Willen

Federal Reserve Bank of Boston - Research Department ( email )

600 Atlantic Avenue
Boston, MA 02210
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
393
Abstract Views
2,390
rank
78,240
PlumX Metrics