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Project Citation: 

He, Zhiguo, Krishnamurthy, Arvind, and Milbradt, Konstantin. Replication data for: What Makes US Government Bonds Safe Assets? Nashville, TN: American Economic Association [publisher], 2016. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2019-10-12. https://doi.org/10.3886/E113478V1

Project Description

Summary:  View help for Summary US government bonds are considered to be the world's safe store of value, especially during periods of economic turmoil such as the events of 2008. But what makes US government bonds "safe assets"? We highlight coordination among investors, and build a model in which two countries with heterogeneous sizes issue bonds that may be chosen as safe asset. Our model illustrates the benefit of a large absolute debt size as safe asset investors have "nowhere else to go" in equilibrium, and the large country's bonds are chosen as the safe asset. Moreover, the effect becomes stronger in crisis periods.

Scope of Project

JEL Classification:  View help for JEL Classification
      E32 Business Fluctuations; Cycles
      E43 Interest Rates: Determination, Term Structure, and Effects
      H63 National Debt; Debt Management; Sovereign Debt


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