Liquidity buffers had mixed impact during Covid-19, ECB paper finds
Higher buffers for funds slowed initial fire sales but had less impact during “peak phase”
Evidence from the Covid-19 crisis shows that liquidity buffers for investment firms had mixed effects in preventing asset “fire sales”, a working paper says.
Liquidity buffers and open-end investment funds: containing outflows and reducing fire sales is published by the European Central Bank. Lennart Dekker, Luis Molestina Vivar, Michael Wedow and Christian Weistroffer look at eurozone-domiciled funds that on average invested at least 50% of their portfolios in corporate bonds.
They examine
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