The response of money market funds to the COVID-19 pandemic.

The Covid-19 Pandemic has increased the attention paid to money market funds. Using Covid-19 cases and a measure of lockdowns, shutdowns, etc., we analyze if money market fund investors and managers responded to the intensity of the pandemic. We ask whether or not the Federal Reserve implementation of the Money Market Mutual Fund Liquidity Facility (MMLF) had an effect on market participant behavior. We find that institutional prime investors responded significantly to the MMLF. Fund managers responded to the intensity of the pandemic but largely ignored the reduction in uncertainty created by the implementation of the MMLF.