Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/197894 
Year of Publication: 
2018
Series/Report no.: 
Bank of Canada Staff Working Paper No. 2018-41
Publisher: 
Bank of Canada, Ottawa
Abstract: 
The scale of safe assets suggests a structural demand for a safe wealth share beyond transaction and liquidity roles. We study how investors achieve a reference wealth level by combining self-insurance and contingent liquidation of investment. Intermediaries improve upon autarky, insuring investors with poor self-insurance and limiting liquidation. However, delegation creates a conflict in states with residual risk. Demandable debt ensures safety-seeking investors can withdraw to implement a safe outcome, so private safety provision is fragile. Public debt crowds out private credit supply and investment, while deposit insurance crowds them in by reducing liquidation in residual risk states.
Subjects: 
Financial institutions
JEL: 
G2
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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