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 documents significant cross-border effects of the 2014 US money market fund (MMF) reform on euro area MMFs. As US-based prime funds became less money-like due to the reform, euro area-based prime funds received large inflows from foreign investors. These cross-border flows were mainly motivated by the search for stable NAV instruments. Consistent with an easing of competitive pressure, euro area prime MMFs reduced their risk-taking. Lastly, the 2017 EU MMF regulation, a weaker regulatory intervention compared to the US reform, did not lead to a reversal of the documented cross-border flows.