Liquidity and Volatility in the Municipal Bond Market: Evidence from the Municipal Liquidity Facility and other early interventions
At the onset of the pandemic, the federal government stepped in with fiscal and monetary policy actions to assist distressed municipalities. In particular, the Municipal Liquidity Facility (MLF) was established to create a market maker of last resort. In this paper, we examine the extent to which the provision of federal aid to states and the implementation of the MLF was successful in promoting proper market functioning by looking at the plausibly causal effect of these policies on medium-term municipal market volatility.
Jul 10, 2024
