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The Safe Asset Controversy: Policy Implications after the Crisis

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  • Christoph Große Steffen

Abstract

Safe assets are the lubricant of the financial system. They serve as a store of value, to meet regulatory requirements, and as a pricing benchmark. Some researchers identify a severe and chronic global safe asset shortage; others disagree, while empirical evidence remains ambiguous. In the post-Lehman world, the availability of safe assets entails new policy challenges. While still a potential source for global imbalances, the debate today stretches further to implications for financial stability and economic policy effectiveness.

Suggested Citation

  • Christoph Große Steffen, 2014. "The Safe Asset Controversy: Policy Implications after the Crisis," DIW Roundup: Politik im Fokus 3, DIW Berlin, German Institute for Economic Research.
    • Handle: RePEc:diw:diwrup:3en
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    References listed on IDEAS

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    1. Ricardo J. Caballero & Emmanuel Farhi, 2013. "A Model of the Safe Asset Mechanism (SAM): Safety Traps and Economic Policy," Working Paper 70936, Harvard University OpenScholar.
    2. Ricardo J. Caballero & Emmanuel Farhi & Pierre-Olivier Gourinchas, 2008. "An Equilibrium Model of "Global Imbalances" and Low Interest Rates," American Economic Review, American Economic Association, vol. 98(1), pages 358-393, March.
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    5. Ricardo J. Caballero & Arvind Krishnamurthy, 2009. "Global Imbalances and Financial Fragility," American Economic Review, American Economic Association, vol. 99(2), pages 584-588, May.
    6. Ingo Fender & Ulf Lewrick, 2013. "Mind the gap? Sources and implications of supply-demand imbalances in collateral asset markets," BIS Quarterly Review, Bank for International Settlements, September.
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    1. repec:cbh:journl:v:14:y:2015:i:1:p:111-138 is not listed on IDEAS
    2. Dániel Horváth & Róbert Szini, 2015. "The safety trap – the financial market and macroeconomic consequences of the scarcity of safe assets," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 14(1), pages 111-138.

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