Central banks have responded to this by re-lending their portfolios of securities. But this is only a temporary fix. The first best solution would clearly be for fiscal issuers to generate more safe assets under the conditions outlined above. If this does not happen, central banks may have to use their own balance sheets to satisfy safe asset demand, also at longer maturities.
A third complication is that extended use of unconventional measures could come with rising side effects, for instance on financial stability, financial intermediation and international  1  The real neutral rate points to the level of real interest rate where monetary policy is neither stimulating nor restraining economic growth. 2  See Caballero, R.J., E. Farhi and P-O.