Safe Assets, Credit Provision and Debt Management

Gabriella Chiesa

Open Economies Review, 2020, vol. 31, issue 3, No 5, 637-667

Abstract: Abstract This paper analyses the interactions between the financial and the real sector in an environment where liquidity holdings is an input of the credit/investment process. The supply of liquidity is constrained in that income pledgeability limits inside liquidity, and there is a range of outside liquidity instruments that differ for safety and liquidity. We analyse the resulting equilibrium asset prices, collateral/liquidity-safety premia, liquidity instrument holdings and real investment. The model is applied to examine the implications of liquidity provision policies and debt management in the Euro Area. We analyse how the correlation structure of the bond market values affects the optimal composition of liquidity instrument holdings and prices, and formalize the concept of a European Safe Bond with a clear analysis of its potential advantages.

Keywords: Safe assets; Liquidity; Debt Management; Sovereign debt spreads (search for similar items in EconPapers)
JEL-codes: E44 G18 H63 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s11079-019-09542-w Abstract (text/html)
Access to full text is restricted to subscribers.

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:kap:openec:v:31:y:2020:i:3:d:10.1007_s11079-019-09542-w

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/11079/PS2

DOI: 10.1007/s11079-019-09542-w

Access Statistics for this article

Open Economies Review is currently edited by G.S. Tavlas

More articles in Open Economies Review from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().