Safe Assets Convenience Yield

Zhiguo He · Arvind Krishnamurthy · Konstantin Milbradt

What makes a sovereign bond a safe asset is not the strength of its fundamentals in absolute terms but their strength relative to the alternatives, together with the size of the debt outstanding -- …

Sebastian Di Tella · Benjamin Hébert · Pablo Kurlat

Building on the Kaplan-Violante two-account incomplete-markets model, this manuscript shows that once idiosyncratic risk is assumed to rise when asset valuations fall, the aggregate value of each …

Sang Rae Kim

This paper studies when a bank is more effective as a supplier of privately produced money-like safe assets (repo, commercial paper), finding that a bank produces safer, more liquid assets when (1) …

Gita Gopinath · Jeremy C Stein

A currency's role as the unit of account in which trade is invoiced and its role as a safe store of value reinforce each other, because households who buy dollar-priced imports want dollar-denominated …

Wenxin Du · Jesse Schreger

A Handbook chapter reviewing the breakdown of covered interest rate parity during the Global Financial Crisis and its persistence through the following decade -- how the cross-currency basis is …

Ralph S.J. Koijen · Motohiro Yogo

The paper develops an asset demand system to analyze, jointly and across all countries, how international portfolio holdings and flows, exchange rates, short-term rates, long-term yields, and equity …

Philippe Bacchetta · Kenza Benhima · Brendan Berthold

Most recent work on optimal foreign-exchange intervention prices the opportunity cost of reserves off either deviations from uncovered interest parity or deviations from covered interest parity, and …

Daniel Barth · R. Jay Kahn

The U.S. Treasury market is the deepest and most liquid fixed-income market in the world, yet in March 2020 it experienced unprecedented dysfunction—widening bid-ask spreads, skyrocketing repo rates, …

Jens H. E. Christensen · Simon T. Hetland

The paper introduces the concept of "passive quantitative easing" (passive QE): a deliberate reduction in government debt issuance that lowers anticipated future bond supply and reduces long-term …

Ralph Luetticke

In a two-asset HANK model where households hold liquid bonds and illiquid capital, monetary policy transmits mainly through investment rather than consumption, but a tightening redistributes income …