Feb 232019

This working paper reassures managers of US dollar reserves at central banks that they need not worry about a shortage of safe assets. This runs counter to the argument that a shortage of safe assets is key to understanding international finance. In that thesis, emerging market economies (EMEs) need to accumulate such assets in line with their own growth. But if advanced economy governments were to issue debt on a scale likely to meet this demand, they risk becoming over-indebted and losing their creditworthiness. Such a hypothetical shortage of safe assets could make managing foreign exchange reserves very difficult. After all, official reserve managers focus on safe assets. 



Sorry, the comment form is closed at this time.