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🎉Congratulations to Tsvetelina Nenova, the winner of this year’s European Central Bank Young Economist Prize #ECBForum with her work “Global or Regional Safe Assets: Evidence from Bond Substitution Patterns”. Read on to learn more about her paper 👇 1/7

Tsvetelina studies the role of safe assets in international investors’ portfolios. Novel substitution elasticities of demand for global bonds shed light on the transmission of Fed and ECB monetary policies both domestically and internationally 2/7

The paper finds that Fed monetary policies trigger global bond market spillovers through the global re-balancing associated with changes in US Treasury returns 3/7

Instead, Euro area safe assets are different : changes in German Bund returns see portfolio rebalancing primarily within the EA sovereign debt market 4/7

The degree of rebalancing between safe and risky bonds decreases during market stress. But this flight to safety takes different forms in the two currency areas. For the Fed, it can reduce monetary policy transmission to corporate financing conditions in a financial crisis 5/7

For the ECB, investors flee to the safety of German Bunds and increase regional fragmentation – impairing monetary policy transmission across the Eurozone 6/7

For more details, read the paper at ecb.europa.eu/press/conferen… 7/7