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The Private Production of Safe Assets

Author

Listed:
  • 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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    References listed on IDEAS

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    Cited by:

    1. Schmidt, Kirsten, 2019. "Does liquidity regulation impede the liquidity profile of collateral?," Working Paper Series 2256, European Central Bank.
    2. Toni Ahnert & Enrico Perotti, 2018. "Seeking Safety," Staff Working Papers 18-41, Bank of Canada.

    More about this item

    Keywords

    information sensitivity; safe assets; safety premium;

    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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