Aug. 8, 2013

Richmond Fed's Economic Quarterly Considers Net Asset Values for Money Market Funds

Richmond, Va.

The instability of money market mutual funds is a subject of active debate. In the latest issue of Economic Quarterly, Richmond Fed economist Huberto M. Ennis explores a new regulatory framework that is likely to be implemented soon in the United States. The design of such a framework should depend on an assessment of which is the main economic function fulfilled by these funds. If money funds are providing maturity transformation, then redemption values that permanently reflect the market value of assets may be hard to compute and may undermine the purpose of the funds. If funds are mainly investment managers, then market-based redemption values can be appropriate and increase the stability of the funds.

You can find the full text of this article and others in the latest issue of Economic Quarterly on our website.

Also in the Fourth Quarter 2012 issue:

• Debt Default and the Insurance of Labor Income Risk by Kartik B. Athreya, Xuan S. Tam, and Eric R. Young
• Regulation and the Composition of CEO Pay by Arantxa Jarque and Brian Gaines

The Economic Quarterly is a free publication containing economic analysis pertinent to Federal Reserve monetary and banking policy. For more information, contact the Federal Reserve Bank of Richmond's Research Department—Publications at 800.322.0565 or visit www.richmondfed.org/research/.

As part of our nation’s central bank, the Richmond Fed is one of 12 regional Reserve Banks working together with the Board of Governors to support a healthy economy and deliver on our mission to foster economic stability and strength. We connect with community and business leaders across the Fifth Federal Reserve District — including the Carolinas, District of Columbia, Maryland, Virginia, and most of West Virginia — to monitor economic conditions, address issues facing our communities, and share this information with monetary and financial policymakers. We also work with banks to ensure they are operating safely and soundly, supply financial institutions with currency that’s fit for distribution, and provide a safe and efficient way to transfer funds through our nation’s payments system.

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