Frictions in Shadow Banking : Evidence from the Lending Behavior of Money Market Funds ∗

@inproceedings{Chernenko2012FrictionsIS,
  title={Frictions in Shadow Banking : Evidence from the Lending Behavior of Money Market Funds ∗},
  author={Sergey V. Chernenko and Adi Sunderam},
  year={2012}
}
We document the consequences of money market fund risk taking during the European sovereign debt crisis. Using a novel data set of security-level holdings of prime money market funds, we show that funds with large exposures to risky Eurozone banks suffered significant outflows between June and August 2011. Due to credit market frictions, these outflows have significant spillover effects on other firms: non-European issuers that typically rely on these funds raise less financing in this period… CONTINUE READING
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