Kartik Anand

The Safe Asset Frontier

We identify the frontier between safe and unsafe assets and show how the growth rate of the economy and its fiscal capacity interact with differences of opinion amongst investors to determine the safe asset equilibrium. Multiple equilibria emerge in our set-up due to strategic complementarities across counterparties, and the safety of the bond depends on the extent to which investors’ opinions diverge from the credit rating of the asset.

Global Stores of Value and the International Role of the Renminbi

We explore the conditions under which a financial asset emerges as a global store of value and can co-exist with a pre-existing (incumbent) store of value. In our model the acceptability of an asset as a global store is driven by the issuing region’s financial development, growth rate, degree of capital liberalization, and by strategic complementarities across investors vying to purchase and sell financial assets. Our model contributes to the debate on the internationalization of the renminbi, supporting the view that deep financial reforms should precede capital account liberalization to sustain the renminbi’s international status over the medium term.