BIS paper tracks new channel for funding ‘dry-ups’

A squeeze in one market can spill over to institutions with no direct exposure, authors find

Parched earth in a dry riverbed

Funding “dry-ups” in particular markets can spread to firms with no direct exposure to the troubled market, research published by the Bank for International Settlements finds.

Iñaki Aldasoro, Florian Balke, Andreas Barth and Egemen Eren note it can be hard to isolate the effects of a dry-up from the broader effects of a financial crisis, as the two often go hand-in-hand. To avoid this they focus on a particular episode in which reforms to US money market funds (MMFs) caused a funding squeeze in

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