On the persistence of the Eonia spread

Hassler, Uwe; Nautz, Dieter

doi:10.1016/j.econlet.2008.08.004

Cited by 41 publications

(47 citation statements)

References 10 publications

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“…The results obtained for the 3M, 6M, and 12M Euribor rate are presented in Table 1 18 According to Hassler and Nautz (2008) and Busch and Nautz (2010) controllability of money market rates requires sufficiently low persistence in changes in longer-term money market rates. If money market rates are too persistent, the lasting impact of shocks can impede the transparency of policy signals and the central bank's influence on money market rates along the yield curve.…”

Section: Steering Euribor Rates: Monetary Policy Expectations and Uncmentioning

confidence: 99%

The effectiveness of monetary policy in steering money market rates during the financial crisis

Abbassi

Linzert

2012

Journal of Macroeconomics

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Section: Steering Euribor Rates: Monetary Policy Expectations and Uncmentioning

confidence: 99%

The effectiveness of monetary policy in steering money market rates during the financial crisis

Abbassi

Linzert

2012

Journal of Macroeconomics

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“…However, recent evidence on the ECB's policy spreads indicate that the central bank's impact on the overnight rate might be weaker than expected. In particular, Hassler and Nautz (2008) and Cassola (2007) found that the Eonia spread is stationary but exhibits long memory with a fractional order of integration d ≈ 0.25. Long-memory behavior in policy spreads implies that there is a long range dependence between the overnight rate and the policy rate which cannot be captured by I(0) processes like e.g.…”

Section: Fractional Integration and Persistencementioning

confidence: 99%

“…As a consequence, there is no overlap of subsequent MROs anymore and auction volumes doubled, probably making banks' refinancing more difficult and more risky. In fact, banks' increased refinancing risk may explain the significant increase in the persistence of the ECB's policy spread under the new framework, see Hassler and Nautz (2008).…”

Section: Open Market Operationsmentioning

confidence: 99%

“…If the persistence of the policy spread is too high, the lasting impact of shocks would impede the signalling role of the overnight rate and the central bank's control over interest rates. Recently, Cassola (2007) and Hassler and Nautz (2008) showed that the policy spread of the European Central Bank exhibits long memory implying that the central bank's control of the overnight rate is weaker than expected.…”

Section: Introductionmentioning

confidence: 99%

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Monetary policy implementation and overnight rate persistence

Nautz

Scheithauer

2011

Journal of International Money and Finance

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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.

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“…Kliber et al (2015) found a long memory in the POLONIA spread for only one out of seven periods. The persistence of the spread was also analysed by Panigirtzoglou et al (2000) for Germany, Italy, and the UK; by Hassler and Nautz (2008) for the Eurosystem; and by Kliber and Płuciennik (2011) for Poland. They applied, respectively, a simple reduced-form model in parallel with the GARCH model, the ARFIMA model, and tests of long memory.…”

mentioning

confidence: 99%

Monetary policy in steering the EONIA and POLONIA rates in the Eurosystem and Poland: a comparative analysis

Fiszeder

Pietryka

2017

Empir Econ

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The effectiveness of the monetary policies of the European Central Bank (ECB) and the Narodowy Bank Polski (NBP) is compared directly in terms of influencing the spread between the interbank overnight rate and the main rates of the central banks during periods of different economic conditions, i.e. the global financial crisis of 2008, the European sovereign debt crisis and the period of relative stability. Three categories of determinants of the Euro Overnight Index Average/Polish Overnight Index Average (EONIA/POLONIA) spreads are considered: (1) monetary policy instruments such as open market operations, standing facilities and minimum reserve requirements; (2) measures of liquidity conditions; and (3) market expectations and risk measures. Applying the ARFIMA-GARCH models, we show that the statistical and economic properties of the EONIA and POLONIA spreads are quite different. The EONIA spread has a long memory while the POLONIA spread is characterized by a short memory. This difference is important from the viewpoint of a stabilizing monetary policy. The impact of shocks on the future levels of the spread was stronger for the POLONIA spread, but it was short-lived in comparison with the EONIA spread. Most of the analysed variables significantly influenced the spreads during the financial crisis, while the biggest differences in the impact of determinants between the EONIA and POLONIA spreads occurred during the period of relative stability. Substantial differences also exist between the volatilities of both spreads.

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On the persistence of the Eonia spread

Cited by 41 publications

References 10 publications

The effectiveness of monetary policy in steering money market rates during the financial crisis

The effectiveness of monetary policy in steering money market rates during the financial crisis

Monetary policy implementation and overnight rate persistence

Monetary policy in steering the EONIA and POLONIA rates in the Eurosystem and Poland: a comparative analysis

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