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Discussion Paper Details

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Title: The Private Production of Safe Assets

Author(s): Marcin Kacperczyk, Christophe Perignon and Guillaume Vuillemey

Publication Date: June 2017

Keyword(s): Collateral, safe assets, Short-term debt and Treasuries

Programme Area(s): Financial Economics

Abstract: Do claims on the private sector serve the role of safe assets? We answer this question using high-frequency panel data on prices and quantities of certificates of deposit (CD) and commercial paper (CP) issued in Europe. We show that only very short-term private securities benefit from a premium for safety. We then use several sources of variation to show that the issuance of short-term CDs strongly responds to measures of safety demand. The private production of safe assets is stronger for issuers with high credit worthiness, and breaks down during episodes of market stress. We conclude that even very short-term private assets are sensitive to changes in the information environment and should not be treated as equally safe at all times.

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Bibliographic Reference

Kacperczyk, M, Perignon, C and Vuillemey, G. 2017. 'The Private Production of Safe Assets'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=12086