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Time inconsistency in recent monetary policy (Vox EU, 15 min read) Goodhart highlights the problems with low and negative rates such as debt traps, bubbles and financial imbalances. But he also argues that exiting negative rates may bring their own problems in terms of higher defaults. He also suggests that structural deflationary forces are about to turn. [Bullish rates in short-term]
Sovereign Debt Portfolios, Bond Risks and the Credibility of Monetary Policy (Journal of Finance, 45 page read) This paper finds that governments whose local currency debt could theoretically provide the best hedging benefits actually end up borrowing more in foreign currency. This is partly due to poor monetary policy commitments, which then requires foreign currency issuance to attract investors. [Bearish local EM]
Stock Market Evidence on the International Transmission Channels of US Monetary Policy Surprises (SNB, 25 page read) SNB finds that historically dovish Fed surprises boost foreign stock markets on lower expected real rates. More recently, QE surprises boost foreign stocks through better expected cashflows. [Bullish equities]