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The supply of 'safe' assets and fiscal policy


  • Schuknecht, Ludger


This study looks at the interrelationship between fiscal policy and safe assets as there is surprisingly little analysis about this beyond fleeting references. The study argues that from a certain point more public debt will not "buy" more safety: countries face a kind of "safe-assets Laffer curve" with a maximum amount of safe assets at some level of indebtedness. The position and "stability" of this curve depend on a number of national and international factors, including the international risk appetite and, as a more recent factor, QE policies by central banks. The study also finds evidence of declining safe assets as reflected in government debt ratings.

Suggested Citation

  • Schuknecht, Ludger, 2016. "The supply of 'safe' assets and fiscal policy," CFS Working Paper Series 532, Center for Financial Studies (CFS).
  • Handle: RePEc:zbw:cfswop:532

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    References listed on IDEAS

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    More about this item


    fiscal policy; public debt; safe assets; financial markets;

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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