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Reserve Currency Status as a Safe Asset Determinant. Empirical Evidence from Main Public Issuers in the Period 2005–2017

Author

Listed:
  • Bogołębska Joanna

    (Ph.D., Associate Professor, University of Lodz, Faculty of Economics and Sociology, International Business and Trade Department, Lodz, Poland)

  • Feder-Sempach Ewa

    (Ph.D., Assistant Professor, University of Lodz, Faculty of Economics and Sociology, International Finance and Investment Department, Lodz, Poland)

  • Stawasz-Grabowska Ewa

    (Ph.D., Assistant Professor, University of Lodz, Faculty of Economics and Sociology, International Finance and Investment Department, Lodz, Poland)

Abstract

Safe assets are recognized as being the cornerstone of contemporary financial systems. Due to financial globalization and massive international capital flows, they transformed into global safe assets, meaning that both demand and supply sides can be created by international investors. The article consists of two main parts. The first one concentrates on the theoretical issues of safe assets: definitions, attributes, categories of investors who search for them, as well as categories of suppliers. The theoretical considerations lead to the conclusions that only debt instruments can be used as safe assets, and due to limited substitutability between private and public issues, only the latter can perform this function properly, especially in times of stress. In the context of global safe asset considerations, it seems reasonable that only countries issuing reserve currencies can become public issuers of safe assets.

Suggested Citation

  • Bogołębska Joanna & Feder-Sempach Ewa & Stawasz-Grabowska Ewa, 2019. "Reserve Currency Status as a Safe Asset Determinant. Empirical Evidence from Main Public Issuers in the Period 2005–2017," Comparative Economic Research, Sciendo, vol. 22(3), pages 65-81, September.
    • Handle: RePEc:vrs:coecre:v:22:y:2019:i:3:p:65-81:n:4
    DOI: 10.2478/cer-2019-0023
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    Keywords

    safe assets; developed economies; government bonds; reserve currencies;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E63 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Comparative or Joint Analysis of Fiscal and Monetary Policy; Stabilization; Treasury Policy
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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