Safe Assets at Financial Globalization

The paper explores the impact of safe assets on the economic growth on the financial globalization context. The method employs both cross-section and panel data regression on a data sample of 150 economies, both advanced and developing ones, over the 1990-2019 period. The robustness analysis is carried out by controlling for different sub-sampling data, including advanced economies compared with emerging and developing economies, and 3 consecutive 10-year periods from 1990 to 2019. The empirical evidence establishes an inverted-U-shaped dependence pattern of economic growth on the assets safety, measured by the sovereign debts rating. The economic growth is first increasing then decreasing on the assets safety, with the turning point being the value at 12.0 of sovereign debts rating. Thus, the assets safety only exerts a positive impact on the economic growth for the low safety level. The paper makes contribution on the economic growth literature by uncovering an inverted-U-shaped pattern of economic growth, and also on the safe assets literature by charactering the impact of sovereign debts rating, a proxy for the safety of government debts, on the economic growth.