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Safe Assets, Collateral Premium And Sovereign Bond Spreads

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  • Gabriella Chiesa

    (Department of Economics University of Bologna)

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 not all sovereign debt is safe/liquid. We derive firms’/banks’ liquid asset portfolios and real investment/credit-lines provision, government bonds’ prices, the associated liquidity/collateral premia and bond spreads, aggregate investment and credit. We provide empirical evidence of the model’s predictions for the Euro-area, and the relevance of a European safe asset for the long run survival of the euro-zone

Suggested Citation

  • Gabriella Chiesa, 2018. "Safe Assets, Collateral Premium And Sovereign Bond Spreads," Rivista Internazionale di Scienze Sociali, Vita e Pensiero, Pubblicazioni dell'Universita' Cattolica del Sacro Cuore, vol. 126(4), pages 397-422.
    • Handle: RePEc:vep:journl:y:2018:v:126:i:4:p:397-422
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    More about this item

    Keywords

    Safe assets; Liquidity; Credit; Sovereign debt spreads;
    All these keywords.

    JEL classification:

    • I20 - Health, Education, and Welfare - - Education - - - General

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