You Can’t Always Get What You Want (Where You Want It): Cross-Border Effects of the US Money Market Fund Reform

Title: You Can’t Always Get What You Want (Where You Want It): Cross-Border Effects of the US Money Market Fund Reform

Abstract: This paper shows that the 2014 US money market fund (MMF) reform was associated with stabilizing cross-border effects for Euro Area MMFs. The reform forced US-based institutional prime MMFs to switch from constant to variable net asset value, while MMFs in other jurisdictions where not directly affected. We document that US-focused institutional prime MMFs domiciled in the Euro Area received substantial inflows from foreign investors around the implementation of the reform. Consistent with an easing of competitive pressure, affected MMFs reduce their risk-taking.