The Demand for Money Market Mutual Funds

32 Pages Posted: 17 Aug 2017 Last revised: 27 Jun 2018

Multiple version iconThere are 2 versions of this paper

Date Written: May 5, 2005


This paper presents a model on the demand for money market funds (MMFs).These funds are a very close substitute for M1 deposits, except that MMFs do not satisfy immediate transaction requirements. The demand for MMFs strengthens when the intended volume of transactions is low.A high interest rate level makes it expensive to hold M1 deposits.High interest rate volatility, paradoxically, increases the risk of holding M1 deposits stronger than the risk of holding MMFs.The results are largely corroborated by Finnish data. Key words: money market mutual funds, money demand JEL classification numbers: G23, G29, E41

JEL Classification: G23, G29, E41

Suggested Citation

Kauko, Karlo, The Demand for Money Market Mutual Funds (May 5, 2005). Bank of Finland Research Discussion Paper No. 14/2005, Available at SSRN:

Karlo Kauko (Contact Author)

Bank of Finland ( email )

P.O. Box 160
FIN-00101 Helsinki

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