Scarcity of Safe Assets and Global Neutral Interest Rates

Thiago Revil T. Ferreira and Samer Shousha
Additional contact information
Thiago Revil T. Ferreira: https://www.federalreserve.gov/econres/thiago-r-t-ferreira.htm

No 1293, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We quantitatively evaluate the role of supply and demand of safe assets in determining neutral interest rates. Using an empirical cross-country state-space model, we find that the net supply of sovereign safe assets available to the private sector in secondary markets is an important driver of neutral rates for 11 advanced economies in the period 1970–2018. We also find that the global accumulation of international reserves in sovereign safe assets since the 1990s (the global savings glut) lowered the net supply of these assets and, thus reduced neutral rates by up to 50 basis points in our sample.

Keywords: neutral interest rates; Scarcity of safe assets; International reserves; global savings glut (search for similar items in EconPapers)
JEL-codes: E21 E43 E52 (search for similar items in EconPapers)
Date: 2020-07-10
New Economics Papers: this item is included in nep-ifn, nep-mac and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
https://www.federalreserve.gov/econres/ifdp/files/ifdp1293.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:fip:fedgif:1293

DOI: 10.17016/IFDP.2020.1293

Access Statistics for this paper

More papers in International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.) Contact information at EDIRC.
Bibliographic data for series maintained by Ryan Wolfslayer ; Keisha Fournillier ().