Advanced Search
MyIDEAS: Login to save this paper or follow this series

A Model of the Safe Asset Mechanism (SAM): Safety Traps and Economic Policy

Contents:

Author Info

  • Ricardo J. Caballero
  • Emmanuel Farhi

Abstract

The global economy has a chronic shortage of safe assets which lies behind many recent macroeconomic imbalances. This paper provides a simple model of the Safe Asset Mechanism (SAM), its recessionary safety traps, and its policy antidotes. Safety traps share many common features with conventional liquidity traps, but also exhibit important differences, in particular with respect to their reaction to policy packages. In general, policy-puts (such as QE1, LTRO, fiscal policy, etc.) that support future bad states of the economy play a central role in the SAM environment, while policy-calls that support the good states of the recovery (e.g., some aspects of forward guidance) are less powerful. Public debt plays a central role in SAM as long as the government has spare fiscal capacity to back safe asset production.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.nber.org/papers/w18737.pdf
Download Restriction: Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 18737.

as in new window
Length:
Date of creation: Jan 2013
Date of revision:
Handle: RePEc:nbr:nberwo:18737

Note: EFG IFM ME
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Phone: 617-868-3900
Email:
Web page: http://www.nber.org
More information through EDIRC

Related research

Keywords:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Gary B. Gorton & Andrew Metrick, 2009. "Securitized Banking and the Run on Repo," NBER Working Papers 15223, National Bureau of Economic Research, Inc.
  2. Bengt Holmstrom & Jean Tirole, 1998. "Private and Public Supply of Liquidity," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 106(1), pages 1-40, February.
  3. Jeremy C. Stein, 2012. "Monetary Policy as Financial Stability Regulation," The Quarterly Journal of Economics, Oxford University Press, vol. 127(1), pages 57-95.
  4. Lawrence Christiano & Martin Eichenbaum & Sergio Rebelo, 2009. "When is the government spending multiplier large?," NBER Working Papers 15394, National Bureau of Economic Research, Inc.
  5. Emmanuel Farhi & Iván Werning, 2012. "Fiscal Multipliers: Liquidity Traps and Currency Unions," NBER Working Papers 18381, National Bureau of Economic Research, Inc.
  6. Guido Lorenzoni & Veronica Guerrieri, 2011. "Credit Crises, Precautionary Savings and the Liquidity Trap," 2011 Meeting Papers, Society for Economic Dynamics 1414, Society for Economic Dynamics.
  7. Gary B. Gorton & Guillermo Ordoñez, 2013. "The Supply and Demand for Safe Assets," NBER Working Papers 18732, National Bureau of Economic Research, Inc.
  8. Gauti B. Eggertsson & Paul Krugman, 2012. "Debt, Deleveraging, and the Liquidity Trap: A Fisher-Minsky-Koo Approach," The Quarterly Journal of Economics, Oxford University Press, vol. 127(3), pages 1469-1513.
  9. Anton Korinek & Alp Simsek, 2014. "Liquidity Trap and Excessive Leverage," Koç University-TUSIAD Economic Research Forum Working Papers, Koc University-TUSIAD Economic Research Forum 1410, Koc University-TUSIAD Economic Research Forum.
  10. Bansal, Ravi & Coleman, Wilbur John, II, 1996. "A Monetary Explanation of the Equity Premium, Term Premium, and Risk-Free Rate Puzzles," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 104(6), pages 1135-71, December.
  11. Arvind Krishnamurthy & Annette Vissing-Jorgensen, 2012. "The Aggregate Demand for Treasury Debt," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 120(2), pages 233 - 267.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Anton Korinek & Alp Simsek, 2014. "Liquidity Trap and Excessive Leverage," Koç University-TUSIAD Economic Research Forum Working Papers, Koc University-TUSIAD Economic Research Forum 1410, Koc University-TUSIAD Economic Research Forum.
  2. Alan Moreira & Alexi Savov, 2014. "The Macroeconomics of Shadow Banking," NBER Working Papers 20335, National Bureau of Economic Research, Inc.
  3. Alexi Savov & Alan Moreira, 2014. "The Macroeconomics of Shadow Banking," 2014 Meeting Papers, Society for Economic Dynamics 254, Society for Economic Dynamics.
  4. Anton Korinek & Alp Simsek, 2014. "Liquidity Trap and Excessive Leverage," IMF Working Papers, International Monetary Fund 14/129, International Monetary Fund.
  5. Alejandro Justiniano & Giorgio E. Primiceri & Andrea Tambalotti, 2013. "The Effects of the Saving and Banking Glut on the U.S. Economy," NBER Chapters, National Bureau of Economic Research, Inc, in: NBER International Seminar on Macroeconomics 2013, pages 52-67 National Bureau of Economic Research, Inc.
  6. Samuel G. Hanson & Andrei Shleifer & Jeremy C. Stein & Robert W. Vishny, 2014. "Banks as Patient Fixed-Income Investors," NBER Working Papers 20288, National Bureau of Economic Research, Inc.
  7. de la Torre, Augusto & Ize, Alain, 2013. "The foundations of macroprudential regulation : a conceptual roadmap," Policy Research Working Paper Series, The World Bank 6575, The World Bank.
  8. Andreas Steiner, 2013. "A Tale of Two Deficits: Public Budget Balance of Reserve Currency Countries," Working Papers, Institute of Empirical Economic Research 97, Institute of Empirical Economic Research.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:18737. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.