Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/228233 
Year of Publication: 
2020
Series/Report no.: 
ECB Working Paper No. 2355
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
We study what makes government bonds a safe asset. Building on a sample of monthly changes in government bond yields in 40 advanced and emerging countries, we analyse the sensitivity of yields to country specific fundamentals interacted with changes in global risk (VIX). We find that inertia (whether the bond behaved as a safe asset in the past) and good institutions foster a safe asset status, while the size of the debt market is also significant, reflecting the special role of the US. Within advanced and emerging markets, drivers are heterogeneous, with external sustainability in particular being relevant for the latter countries after the global financial crisis. Finally, the safe asset status does not appear to depend on whether the change in global risk is driven by financial shocks rather than by US monetary policy.
Subjects: 
Safe assets
global risk
fundamentals
monetary policy
JEL: 
E42
E52
F31
F36
F41
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-3998-0
Document Type: 
Working Paper

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