What Makes US Government Bonds Safe Assets?

Zhiguo He (), Arvind Krishnamurthy and Konstantin Milbradt

American Economic Review, 2016, vol. 106, issue 5, 519-23

Abstract: US government bonds are considered to be the world's safe store of value, especially during periods of economic turmoil such as the events of 2008. But what makes US government bonds "safe assets"? We highlight coordination among investors, and build a model in which two countries with heterogeneous sizes issue bonds that may be chosen as safe asset. Our model illustrates the benefit of a large absolute debt size as safe asset investors have "nowhere else to go" in equilibrium, and the large country's bonds are chosen as the safe asset. Moreover, the effect becomes stronger in crisis periods.

JEL-codes: E32 E43 H63 (search for similar items in EconPapers)
Date: 2016
Note: DOI: 10.1257/aer.p20161109
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

Downloads: (external link)
https://www.aeaweb.org/articles?id=10.1257/aer.p20161109 (application/pdf)
https://www.aeaweb.org/aer/ds/10605/P2016_1109_ds.zip (application/zip)
https://www.aeaweb.org/articles/attachments?retrie ... MtRmlaiGmnxaSrxmPcZe (application/zip)
Access to full text is restricted to AEA members and institutional subscribers.

Related works:
Working Paper: What Makes US Government Bonds Safe Assets? (2016)
Working Paper: What Makes US Government Bonds Safe Assets? (2016)
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:aea:aecrev:v:106:y:2016:i:5:p:519-23

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().