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SUMMARY:A Model of Safe Asset Determination
DTSTART:20161026T103000
DTEND:20161026T120000
DTSTAMP:20260510T084159Z
UID:c9c423719ff5f8434d75af720710e77f50c8480ee4d9d9ca7fee0555
CATEGORIES:Conferences - Seminars
DESCRIPTION:Arvind KRISHNAMURTHY (Standford)\nWhat makes an asset a “saf
 e asset”? We study a model where two countries each issue sovereign bond
 s to satisfy investors’ safe asset demands. The countries differ in the 
 float of their bonds and their resources/fundamentals available to rollove
 r debts. A sovereign’s debt is more likely to be safe if its fundamental
 s are strong relative to other possible safe assets\, but not necessarily 
 strong on an absolute basis. Debt float can enhance or detract from safety
 : If global demand for safe assets is high\, a large float can enhance saf
 ety. The large float offers greater liquidity which increases demand for t
 he large debt and thus reduces rollover risk. If demand for safe assets is
  low\, then large debt size is a negative as rollover risk looms large. Wh
 en global demand is high\, countries may make fiscal/debt-structuring deci
 sions to enhance their safe asset status. These actions have a tournament 
 feature\, and are self-defeating: countries may over-expand debt size to w
 in the tournament. Coordination can generate benefits. The model sheds lig
 ht on the effects of “Eurobonds” – i.e. a coordinated Euro-area-wide
  safe bond design. Eurobonds deliver welfare benefits only when they make 
 up a sufficiently large fraction of countries’ debts. Small steps toward
 s Eurobonds may hurt countries and not deliver welfare benefits.
LOCATION:UNIL\, Extranef\, room 125 https://planete.unil.ch/plan/?local=EX
 T-125
STATUS:CONFIRMED
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