The Private Production of Safe Assets

Marcin Kacperczyk, Christophe Perignon () and Guillaume Vuillemey

No 12395, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: How fragile is the production of safe assets by the private sector? We answer this question using high-frequency data on certificates of deposit (CDs) issued in Europe. We show that only short-term CDs benefit from a safety premium. Using two identification strategies, we further show that the issuance of short-term CDs strongly responds to measures of safety demand. During periods of stress, this relation vanishes. However, high-quality issuers are still able to issue safe assets in periods of stress as investors distinguish between high- and low-quality issuers. Therefore, concerns about externalities arising from private safety production may be partially overstated.

Keywords: Safe assets; Safety premium; Information sensitivity (search for similar items in EconPapers)
JEL-codes: E41 E43 E44 (search for similar items in EconPapers)
Date: 2017-06
New Economics Papers: this item is included in nep-eur, nep-mac and nep-pay
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Citations: View citations in EconPapers (7)

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Related works:
Journal Article: The Private Production of Safe Assets (2021)
Working Paper: The Private Production of Safe Assets (2017)
Working Paper: The Private Production of Safe Assets (2017)
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