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The Private Production of Safe Assets

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  • Kacperczyk, Marcin
  • Perignon, Christophe
  • Vuillemey, Guillaume

Abstract

Do claims on the private sector serve the role of safe assets? We answer this question using high-frequency panel data on prices and quantities of certificates of deposit (CD) and commercial paper (CP) issued in Europe. We show that only very short-term private securities benefit from a premium for safety. Using several identification strategies, we show that the issuance of short-term CDs, but not of CPs, strongly responds to measures of safety demand. The private production of safe assets is stronger for issuers with high credit worthiness, and breaks down during episodes of market stress. We conclude that even very short-term private assets are sensitive to changes in the information environment and should not be treated as equally safe at all times.

Suggested Citation

  • Kacperczyk, Marcin & Perignon, Christophe & Vuillemey, Guillaume, 2017. "The Private Production of Safe Assets," CEPR Discussion Papers 12395, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:12395
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    Cited by:

    1. Wayne Passmore & Judit Temesvary, 2020. "Investor Demands for Safety, Bank Capital, and Liquidity Measurement," Finance and Economics Discussion Series 2020-079, Board of Governors of the Federal Reserve System (U.S.).
    2. Schmidt, Kirsten, 2019. "Does liquidity regulation impede the liquidity profile of collateral?," Working Paper Series 2256, European Central Bank.
    3. Toni Ahnert & Enrico Perotti, 2018. "Seeking Safety," Staff Working Papers 18-41, Bank of Canada.
    4. Infante, Sebastian, 2020. "Private money creation with safe assets and term premia," Journal of Financial Economics, Elsevier, vol. 136(3), pages 828-856.

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    More about this item

    Keywords

    information sensitivity; safe assets; safety premium;
    All these keywords.

    JEL classification:

    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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