Safety traps, liquidity and information-sensitive assets

Michele Loberto

No 1216, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We investigate the implications of a scarcity of safe assets in a framework in which the safety of an asset is an equilibrium outcome. The intrinsic characteristics and supply of the assets determine their liquidity properties and degree of safeness. The equilibrium can be inefficient even if assets are plentiful and information insensitive. Only a sufficiently broad expansion of a particular class of safe information-insensitive assets can achieve the first-best allocation, while a marginal increase in their supply can be ineffective. We conclude that microfounding assets safety is fundamental to understand the effects and policy implications of safe assets scarcity.

Keywords: safe assets; private information; liquidity; asset prices (search for similar items in EconPapers)
JEL-codes: D8 E4 E5 E6 G1 (search for similar items in EconPapers)
Date: 2019-04
New Economics Papers: this item is included in nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://www.bancaditalia.it/pubblicazioni/temi-disc ... 216/en_tema_1216.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_1216_19

Access Statistics for this paper

More papers in Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area Contact information at EDIRC.
Bibliographic data for series maintained by ().