The Flight to Safety and International Risk Sharing

Rohan Kekre, Moritz Lenel

Research output: Contribution to journalArticlepeer-review

2 Scopus citations


We study a business cycle model of the international monetary system featuring a time-varying demand for safe dollar bonds, greater risk-bearing capacity in the United States than the rest of the world, and nominal rigidities. A flight to safety generates a dollar appreciation and decline in global output. Dollar bonds thus command a negative risk premium, and the United States holds a levered portfolio of capital financed in dollars. We quantify the effects of safety shocks and heterogeneity in risk-bearing capacity for global macroeconomic volatility, US external adjustment, and policy transmission, as of dollar swap lines.

Original languageEnglish (US)
Pages (from-to)1650-1691
Number of pages42
JournalAmerican Economic Review
Issue number6
StatePublished - Jun 2024

All Science Journal Classification (ASJC) codes

  • Economics and Econometrics


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