Private Money Creation with Safe Assets and Term Premia

@inproceedings{Infante2017PrivateMC,
  title={Private Money Creation with Safe Assets and Term Premia},
  author={Sebasti{\'a}n Zayas Infante},
  year={2017}
}
It has been documented that an increase in the demand for safe assets induces the private sector to create more money-like claims. Focusing on private repos backed by U.S. Treasury securities, I show that an increase in the demand for safe assets leads to a decreases in the issuance of Treasury repos. The intuition is that Treasury securities already function as a safe asset, thus in terms of safe asset creation, private Treasury repos are neutral. In the model, Treasury repos are beneficial… CONTINUE READING

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