How Effective Were the Federal Reserve Emergency Liquidity Facilities? Evidence from the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility







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    • Duygan-Bump and Suarez are at the Federal Reserve Board, Parkinson was formerly at the Federal Reserve Board, and Rosengren and Willen are at the Federal Reserve Bank of Boston. Parkinson played a key role in the design of the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, and Duygan-Bump and Rosengren were actively engaged in policies related to its implementation. We are indebted to an anonymous referee, Cam Harvey (the Editor), and an Associate Editor for detailed comments that greatly improved the paper. For valuable comments, we also thank Steffanie Brady, Ricardo Correa, Dan Covitz, Giovanni Dell'Ariccia, Refet Gürkaynak, Luc Laeven, Patrick McCabe, Bill Nelson, Andy Powell, Steve Sharpe, Bart Simon, and seminar and conference participants at the Federal Reserve Banks of Atlanta and Boston, the Federal Reserve Board, LACEA, IBEFA, and the International Monetary Fund. Neil Goodson, Jonathan Larson, Jonathan Morse, Landon Stroebel, and Isaac Weingram provided excellent research assistance. The views expressed here are those of the authors and do not necessarily represent those of the Federal Reserve Bank of Boston or the Federal Reserve Board.


The events following Lehman's failure in 2008 and the current turmoil emanating from Europe highlight the structural vulnerabilities of short-term credit markets and the role of central banks as back-stop liquidity providers. The Federal Reserve's response to financial disruptions in the United States importantly included the creation of liquidity facilities. Using a differences-in-differences approach, we evaluate one of the most unusual of these interventions—the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility. We find that this facility helped stabilize asset outflows from money market funds and reduced asset-backed commercial paper yields significantly.