Foreign-currency bonds: currency choice and the role of uncovered and covered interest parity
In: Working paper series Eurosystem
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In: Working paper series Eurosystem
In: Working paper series 839
In: ECB Working Paper No. 2024/2931
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In: ECB Working Paper No. 2280 (2019); ISBN 978-92-899-3542-5
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In: ECB Working Paper No. 1799
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In: ECB Working Paper No. 1609
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Working paper
In: Journal of international economics, Band 87, Heft 1, S. 50-64
ISSN: 0022-1996
In: ECB Working Paper No. 1288
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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.
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In: ECB Working Paper No. 2116, ISBN: 978-92-899-3039-0
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Working paper
In: ECB Working Paper No. 1921
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Working paper
In: ECB Working Paper No. 1442
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Working paper
In: ECB Working Paper No. 2023/2868
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