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The supply of 'safe' assets and fiscal policy

Ludger Schuknecht

No 532, CFS Working Paper Series from Center for Financial Studies (CFS)

Abstract: This study looks at the interrelationship between fiscal policy and safe assets as there is surprisingly little analysis about this beyond fleeting references. The study argues that from a certain point more public debt will not "buy" more safety: countries face a kind of "safe-assets Laffer curve" with a maximum amount of safe assets at some level of indebtedness. The position and "stability" of this curve depend on a number of national and international factors, including the international risk appetite and, as a more recent factor, QE policies by central banks. The study also finds evidence of declining safe assets as reflected in government debt ratings.

Keywords: fiscal policy; public debt; safe assets; financial markets (search for similar items in EconPapers)
JEL-codes: E62 G10 (search for similar items in EconPapers)
Date: 2016
New Economics Papers: this item is included in nep-mac, nep-pbe and nep-rmg
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https://www.econstor.eu/bitstream/10419/144820/1/864780834.pdf (application/pdf)

Related works:
Journal Article: The Supply of Safe Assets and Fiscal Policy (2018) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cfswop:532

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