Finally, while the removal of a stable net asset value for low-volatility MMFs would reduce cliff effects, we argue that this might not be necessary if liquidity requirements for these private debt MMFs are sufficiently strengthened. The article also proposes that the impediments to the use of liquidity buffers should be removed and authorities should have a role in releasing these buffers.
Specifically, the article provides a rationale for requiring private debt MMFs to hold higher levels of liquid assets, of which a part should be public debt, and considers the design and calibration of such a requirement. JEL Code D31 : Microeconomics→Distribution→Personal Income, Wealth, and Their Distributions E21 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Consumption, Saving, Wealth E24 : Macroeconomics and Monetary Economics→Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy→Employment, Unemployment, Wages, Intergenerational Income Distribution, Aggregate Human Capital G11 : Financial Economics→General Financial Markets→Portfolio Choice, Investment Decisions J31 : Labor and Demographic Economics→Wages, Compensation, and Labor Costs→Wage Level and Structure, Wage DifferentialsĪbstract This article assesses proposed reforms to the European Money Market Funds (MMF) Regulation to enhance the resilience of the sector. As a result, they accumulate less wealth. Confronted with high house prices and low, risky incomes, many young households cannot or do not want to risk making such a big, illiquid investment.
In this analysis, I show that increases in labour income inequality and uncertainty are key drivers of this trend.
Abstract Homeownership among younger households has been decreasing in several major advanced economies.
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