In a recent post, we documented the transmission of monetary policy through money market funds (MMFs). In this post, we complement that analysis by comparing the transmission of monetary policy via MMFs to the transmission via bank deposits and studying the impact of the differential pass-through on the size of the MMF industry. To this purpose, we focus on rates on certificates of deposit (CDs) offered to banks’ retail customers and compare their response to monetary policy with that of retail MMF yields.
The full article is available at https://libertystreeteconomics.newyorkfed.org/2019/11/monetary-policy-transmission-and-the-size-of-the-money-market-fund-industry.html