We construct a two-country New Keynesian model in which US government debt has an advantage as a superior collateral … collateral. In times of global stress, the dollar appreciates and the "convenience yield" earned by U.S. government bonds …

advantage as a superior collateral asset in the balance sheets of banks. We show that the model can account for the observed … privilege” as its government bonds are desired by banks both in the U.S. and abroad as superior collateral. In times of global …