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Safe Assets, Collateral Premium and Sovereign Bond Spreads

newdigital Safe Assets, Collateral Premium and Sovereign Bond Spreads
Article
journal RIVISTA INTERNAZIONALE DI SCIENZE SOCIALI
issue RIVISTA INTERNAZIONALE DI SCIENZE SOCIALI - 2018 - 4. An Issue in Honour of Giacomo Vaciago
title Safe Assets, Collateral Premium and Sovereign Bond Spreads
author
publisher Vita e Pensiero
format Article | Pdf
online since 05-2019
doi 10.26350/000518_000017
issn 0035-676X (print) | 1827-7918 (digital)
€ 6.00

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This paper analyses the interactions between the financial and the real sector in an environment where liquidity holdings is an input of the credit/investment process. The supply of liquidity is constrained in that income pledgeability limits inside liquidity, and not all sovereign debt is safe/liquid. We derive firms’/banks’ liquid asset portfolios and real investment/credit-lines provision, government bonds’ prices, the associated liquidity/collateral premia and bond spreads, aggregate investment and credit. We provide empirical evidence of the model’s predictions for the Euro-area, and the relevance of a European safe asset for the long run survival of the euro-zone.

keywords

Safe assets, Liquidity, Credit, Sovereign debt spreads.

Author biography

gabriella.chiesa@unibo.it.