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Is There a Global Safe Haven?
Author(s) -
Habib Maurizio Michael,
Stracca Livio
Publication year - 2015
Publication title -
international finance
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.458
H-Index - 39
eISSN - 1468-2362
pISSN - 1367-0271
DOI - 10.1111/infi.12078
Subject(s) - safe haven , economics , imperfect , monetary economics , asset (computer security) , debt , shock (circulatory) , financial crisis , government (linguistics) , exchange rate , bond , foreign exchange , external debt , risk aversion (psychology) , financial market , haven , financial economics , finance , macroeconomics , expected utility hypothesis , medicine , linguistics , philosophy , computer security , computer science , mathematics , combinatorics
In this paper we search for global safe‐haven assets by analysing the impact of crisis episodes and risk shocks on the behaviour of foreign investors and selected asset prices and yields. We regress de‐trended net purchases by foreign investors of debt instruments issued in safe and liquid financial markets on estimated global risk‐aversion shocks and crisis episodes identified by both quantitative and qualitative means. On the price side, we also look at changes in long‐term government bond yields and the appreciation of the effective exchange rate conditional on risk shocks. We find that US short‐term debt – in particular government debt – is the best, though still imperfect, example of a global safe‐haven asset. In the majority of cases we find that foreign investors head for the exit.