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A Comment on Safe Assets by Barro et al. (2022)

Author

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  • Coqueret, Guillaume
  • Filippin, Maria Elena
  • Laguerre, Martial
  • Weber, Christoph

Abstract

Barro et al. (2022) investigate the quantity of safe assets held in the cross-section of developed countries and find that the average safe-asset ratio (ratio of safe assets to total assets) was 37% in 2015 and has remained relatively stable over time. They also document a crowding-out coefficient for private bonds relative to public bonds of around −0.5. In the second part of the analysis, they simulate a heterogeneous agent model with rare disasters and risk aversion to match the empirical findings. This report seeks to reproduce and confirm their results. Overall, we were largely able to replicate their findings and propose a few robustness checks. Apart from two regression outputs for which the signs and significance do not change, our results are very close to those of the original paper. Alternative models and estimators do not change the signs or significance levels. A more systematic approach to the parameter values in the simulations also points towards solid conclusions.

Suggested Citation

  • Coqueret, Guillaume & Filippin, Maria Elena & Laguerre, Martial & Weber, Christoph, 2024. "A Comment on Safe Assets by Barro et al. (2022)," I4R Discussion Paper Series 122, The Institute for Replication (I4R).
    • Handle: RePEc:zbw:i4rdps:122
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    References listed on IDEAS

    as
    1. Robert J. Barro, 2009. "Rare Disasters, Asset Prices, and Welfare Costs," American Economic Review, American Economic Association, vol. 99(1), pages 243-264, March.
    2. Francis A. Longstaff & Jiang Wang, 2012. "Asset Pricing and the Credit Market," The Review of Financial Studies, Society for Financial Studies, vol. 25(11), pages 3169-3215.
    3. Lucas, Robert E, Jr, 1978. "Asset Prices in an Exchange Economy," Econometrica, Econometric Society, vol. 46(6), pages 1429-1445, November.
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    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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