Depository disintermediation and the equilibrium quantity of money market mutual funds
Document Type
Article
Publication Date
8-1991
Abstract
This study investigates the relationship between market interest rates and the number of money market mutual funds offered from 1971/IV to 1984/IV. The quantity of MMMFs was influenced by the growing gap between market rates and highly regulated explicit rates on commercial bank liquid deposits during this period. A reduced form of the equilibrium quantity of MMMFs is estimated for two theories. One is a peak-rate specification to test whether a sufficiently high interest rate triggers a greater number of MMMFs. The second specification tests whether the number of MMMFs is influenced by a spectrum of market interest rates, as suggested by a distributed-lag scheme. The empirical results show that certain peak-rate specifications outperform the distributed-lag specification, lending support to the notion that the equilibrium quantity of MMMFs varies in a ratchet-like fashion.
DOI
https://doi.org/10.1016/0148-6195(91)90023-P
Publication Information
Maggs, Gary E. (1991). "Depository disintermediation and the equilibrium quantity of money market mutual funds." Journal of Economics and Business 43.3, 253-263.
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