A significant feature of MMMFs or liquid Mutual Funds in India is that they have been mainly catering to the short-term investment needs of institutional investors such as corporate and banks whose redemption requirements are large and simultaneous.
Theoretical work in the late 1970s and early 1980s showed that lower uncertainty about inflation should result in longer contracts.40 Empirical evidence for Canada gathered in the early 1980s was consistent with this theoretical work.41 Using several measures of inflation uncertainty, researchers at the Bank of Canada have confirmed a robust negative relationship between inflation uncertainty and the duration of union contracts in the private sector.42 In other words, as uncertainty about inflation has fallen, the duration of labour contracts has lengthened.