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Article Finds MMF Liquidity Facility Was Effective

A recent Journal of Finance article evaluated how successful the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF) was in stabilizing outflows from money funds and restoring liquidity to the asset-backed commercial paper market.  The AMLF was created by the Federal Reserve in response to the 2008 financial crisis.  It was intended to increase the liquidity of the commercial paper market and provide a means for money funds to liquefy assets without having to suffer fire sale costs.  The authors found that the AMLF was quickly used by money funds as a sizeable source of liquidity and that it helped stabilize fund outflows. They also found that the AMLF helped restore liquidity to the commercial paper market and drive down commercial paper spreads. The full paper can be found here.