Overnight money market rates are the predominant operational target of monetary policy. As a consequence, central banks have redesigned the implementation of monetary policy to keep the deviations of the overnight rate from the key policy rate small and short-lived. This paper uses fractional integration techniques to explore how the operational framework of four major central banks affects the persistence of overnight rates. Our results suggest that a well-communicated and transparent interest rate target of the central bank is a particularly important condition for a low degree of overnight rate persistence.
Kim, Belaire-Franch and ] present different percentiles for the same mean score test statistic. We find that the difference by a factor 0.6 is due to systematically different sample analogues. Furthermore, we clarify which sample versions of the mean-exponential test statistic should be correctly used with which set of critical values. At the same time, we correct some of the limiting distributions found in the literature.
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