IDEAS home Printed from https://ideas.repec.org/a/bla/pbudge/v41y2021i3p42-73.html
   My bibliography  Save this article

The Federal Reserve Municipal Liquidity Facility (MLF): Where the municipal securities market and fed finally meet

Author

Listed:
  • Craig L. Johnson
  • Tima T. Moldogaziev
  • Martin J. Luby
  • Ruth Winecoff

Abstract

The CARES Act authorized the Municipal Liquidity Facility (MLF) with an explicit purpose of aiding state and local governments with their liquidity needs during the COVID‐19 pandemic. Unlike other federal liquidity facilities authorized by the Act that offered short‐term financing to certain dealers and institutional investors in municipal securities, the MLF offered direct access to liquidity to eligible state and local governments. In this article we describe the MLF, including its legal arrangements, structural characteristics, and public policy features. We then empirically evaluate the pricing, credit rating, and issuer eligibility requirements of the MLF, in the context of other federal interventions, using difference‐in‐differences and interrupted time series analysis techniques. Finally, we propose suggestions for the evolution of the MLF and the Federal Reserve's liquidity provision role in response to continued exposure to and recovery from the COVID‐19 pandemic.

Suggested Citation

  • Craig L. Johnson & Tima T. Moldogaziev & Martin J. Luby & Ruth Winecoff, 2021. "The Federal Reserve Municipal Liquidity Facility (MLF): Where the municipal securities market and fed finally meet," Public Budgeting & Finance, Wiley Blackwell, vol. 41(3), pages 42-73, September.
    • Handle: RePEc:bla:pbudge:v:41:y:2021:i:3:p:42-73
    DOI: 10.1111/pbaf.12303
    as

    Download full text from publisher

    File URL: https://doi.org/10.1111/pbaf.12303
    Download Restriction: no
    File URL: https://libkey.io/10.1111/pbaf.12303?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Craig L. Johnson & Martin J. Luby & Tima T. Moldogaziev, 2014. "State and Local Financial Instruments," Books, Edward Elgar Publishing, number 15845.
    2. Min Su & W. Bartley Hildreth, 2018. "Does Financial Slack Reduce Municipal Short†Term Borrowing?," Public Budgeting & Finance, Wiley Blackwell, vol. 38(1), pages 95-113, March.
    3. Ariel Linden, 2015. "Conducting interrupted time-series analysis for single- and multiple-group comparisons," Stata Journal, StataCorp LP, vol. 15(2), pages 480-500, June.
    4. Zakrajsek, Egon & Gilchrist, Simon & Wei, Bin & Yue, Vivian, 2020. "The Fed Takes on Corporate Credit Risk: An Analysis of the Efficacy of the SMCCF," CEPR Discussion Papers 15258, C.E.P.R. Discussion Papers.
    5. repec:fip:a00001:88075 is not listed on IDEAS
    6. Jongmin Shon & Junghack Kim, 2019. "The impact of revenue diversification on municipal debts: comparing short-term and long-term debt levels," Local Government Studies, Taylor & Francis Journals, vol. 45(2), pages 241-261, March.
    7. Ronald C. Fisher & Robert W. Wassmer, 2014. "The Issuance of State and Local Debt During the United States Great Recession," National Tax Journal, National Tax Association;National Tax Journal, vol. 67(1), pages 113-150, March.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Michelle L. Lofton & Sharon N. Kioko, 2021. "The use of short‐term debt by general‐purpose governments," Public Budgeting & Finance, Wiley Blackwell, vol. 41(4), pages 71-93, December.
    2. Castro, P. & Pedroso, R. & Lautenbach, S. & Vicens, R., 2020. "Farmland abandonment in Rio de Janeiro: Underlying and contributory causes of an announced development," Land Use Policy, Elsevier, vol. 95(C).
    3. KAMKOUM, Arnaud Cedric, 2023. "The Federal Reserve’s Response to the Global Financial Crisis and its Effects: An Interrupted Time-Series Analysis of the Impact of its Quantitative Easing Programs," Thesis Commons d7pvg, Center for Open Science.
    4. Christopher David Absell, 2023. "British slave emancipation and the demand for Brazilian sugar," Cliometrica, Springer;Cliometric Society (Association Francaise de Cliométrie), vol. 17(1), pages 125-154, January.
    5. Mahyar Kargar & Benjamin Lester & David Lindsay & Shuo Liu & Pierre-Olivier Weill & Diego Zúñiga, 2021. "Corporate Bond Liquidity during the COVID-19 Crisis [The day coronavirus nearly broke the financial markets]," The Review of Financial Studies, Society for Financial Studies, vol. 34(11), pages 5352-5401.
    6. Nancy M. Wells & Nilda Graciela Cosco & Derek Hales & Muntazar Monsur & Robin C. Moore, 2023. "Gardening in Childcare Centers: A Randomized Controlled Trial Examining the Effects of a Garden Intervention on Physical Activity among Children Aged 3–5 Years in North Carolina," IJERPH, MDPI, vol. 20(11), pages 1-16, May.
    7. Vissing-Jorgensen, Annette, 2021. "The Treasury Market in Spring 2020 and the Response of the Federal Reserve," Journal of Monetary Economics, Elsevier, vol. 124(C), pages 19-47.
    8. Cassandra R. Chambers & Wayne E. Baker, 2020. "Robust Systems of Cooperation in the Presence of Rankings: How Displaying Prosocial Contributions Can Offset the Disruptive Effects of Performance Rankings," Organization Science, INFORMS, vol. 31(2), pages 287-307, March.
    9. Bo Becker & Efraim Benmelech, 2021. "The Resilience of the U.S. Corporate Bond Market During Financial Crises," NBER Working Papers 28868, National Bureau of Economic Research, Inc.
    10. Corazza, Ilaria & Ferrari, Amerigo & Bonciani, Manila, 2023. "Effectiveness of measures to preserve labour and childbirth companionship at the times of COVID-19 outbreak," Health Policy, Elsevier, vol. 129(C).
    11. Luming Shang & Sofia Dermisi & Youngjun Choe & Hyun Woo Lee & Yohan Min, 2023. "Assessing Office Building Marketability before and after the Implementation of Energy Benchmarking and Disclosure Policies—Lessons Learned from Major U.S. Cities," Sustainability, MDPI, vol. 15(11), pages 1-23, May.
    12. Falato, Antonio & Goldstein, Itay & Hortaçsu, Ali, 2021. "Financial fragility in the COVID-19 crisis: The case of investment funds in corporate bond markets," Journal of Monetary Economics, Elsevier, vol. 123(C), pages 35-52.
    13. Huixin Bi & W. Blake Marsh, 2020. "Flight to Liquidity or Safety? Recent Evidence from the Municipal Bond Market," Research Working Paper RWP 20-19, Federal Reserve Bank of Kansas City.
    14. Alexander Karaivanov & Dongwoo Kim & Shih En Lu & Hitoshi Shigeoka, 2022. "COVID-19 vaccination mandates and vaccine uptake," Nature Human Behaviour, Nature, vol. 6(12), pages 1615-1624, December.
    15. Helge Arends, 2017. "Equal Living Conditions vs. Cultural Sovereignty? Federalism Reform, Educational Poverty and Spatial Inequalities in Germany," Publius: The Journal of Federalism, CSF Associates Inc., vol. 47(4), pages 673-706.
    16. Santolini, Raffaella, 2023. "The COVID-19 green certificate’s effect on vaccine uptake in French and Italian regions," Journal of Policy Modeling, Elsevier, vol. 45(5), pages 1036-1057.
    17. Cesa-Bianchi, Ambrogio & Eguren-Martin, Fernando, 2021. "Dash for dollars," Bank of England working papers 932, Bank of England.
    18. Guy Martial Takam Fongang, 2017. "Adoption and impact of improved maize varieties on maize yield in Cameroon: A macro-impact evaluation," Economics Bulletin, AccessEcon, vol. 37(4), pages 2496-2504.
    19. Patricia C. Mosser, 2020. "Central bank responses to COVID-19," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 55(4), pages 191-201, October.
    20. repec:fip:a00001:89437 is not listed on IDEAS
    21. Katherine Baicker & Theodore Svoronos, 2019. "Testing the Validity of the Single Interrupted Time Series Design," NBER Working Papers 26080, National Bureau of Economic Research, Inc.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:pbudge:v:41:y:2021:i:3:p:42-73. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: http://www.blackwellpublishing.com/journal.asp?ref=0275-1100 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.