Abstract
The money market rates in the United States have exhibited a year-end effect consistent with the preferred habitat for liquidity. We revisit the year-end preferred habitat for liquidity using data on government general collateral repurchase agreements (GC Repos). We find no evidence to suggest a year-end effect during the financial crisis. The result is consistent with liquidity hoarding by investors during a crisis characterized by liquidity and solvency issues. Additionally, our findings suggest that investors manage their year-end liquidity following the crisis even when interest rates are historically low.
Original language | English |
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Pages (from-to) | 1-14 |
Number of pages | 14 |
Journal | Journal of Economics and Business |
Volume | 99 |
DOIs | |
State | Published - Sep 1 2018 |
Keywords
- Financial crisis
- Preferred habitat
- Repurchase agreements
- Year-end effect