Access to Safe Assets and Financial Stability

33 Pages Posted: 9 Oct 2019

See all articles by Marco Macchiavelli

Marco Macchiavelli

Board of Governors of the Federal Reserve System

Date Written: September 27, 2019

Abstract

Does access to a safe asset lead to a flight to safety in times of stress? We use the 2013 debt limit episode as our laboratory to answer this question. Money market funds with access to safe repos offered by the Federal Reserve display less sensitivity of outflows to risk exposures, relative to similar funds without access to the Fed. Moreover, access to safe assets does not come at the expense of a flight to safety. Our findings highlight the importance of having access to safe assets in reducing financial fragility of the shadow-banking sector.

Keywords: Money Market Mutual Funds, Safe Assets, Repo, Financial Stability

JEL Classification: G01, G23, E58

Suggested Citation

Macchiavelli, Marco, Access to Safe Assets and Financial Stability (September 27, 2019). Available at SSRN: https://ssrn.com/abstract=3460800 or http://dx.doi.org/10.2139/ssrn.3460800

Marco Macchiavelli (Contact Author)

Board of Governors of the Federal Reserve System ( email )

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

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