Volatility transmission in the European money market

Nautz, Dieter; Offermanns, Christian J.

doi:10.1016/j.najef.2007.07.005

Cited by 31 publications

(25 citation statements)

References 13 publications

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“…It is obvious that the monetary policy of central banks will be quite different in both periods. Examples of such studies of tranquil periods in the Eurosystem are the studies of Würtz (2003), Nautz and Offermanns (2008) and Linzert and Schmidt (2010). Würtz (2003) applied the nonlinear model (the transformed logistic function), which takes into account the fact that the spread is capped by the corridor set by standing facilities.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Additionally, the GARCH component model, which describes the conditional heteroscedasticity of the spread, was used in that study. Nautz and Offermanns (2008) applied a different approach because they did not analyse the difference between the interbank rate and the central bank's main rate but instead used the error correction model in parallel with the EGARCH model to describe the relation between those two series. The study by Linzert and Schmidt (2010) was based on the linear regression model.…”

Section: Literature Reviewmentioning

confidence: 99%

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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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Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

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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“…Nautz a Offermanns, 2008). Analýza úrokových sazeb na peněžním trhu je dále doplňována analýzou změn likvidity trhu během obchodního dne, dopadů tendru na dodání či odčerpání likvidity bankovního systému na obchodní aktivitu bank či efektů ladění fi nální denní likvidní pozice bank za pomocí měnových facilit.…”

Section: Prvky Mikrostruktury Peněžního Trhuunclassified

An Interpretation of Interest Rates Variability in Dealer´s Model of Optimal Interest Margin

Brůna¹,

Korbel²

2013

Politicka ekonomie

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“…Nautz and Offermanns (2008). To ensure that our results will not depend on the large Eonia movements at the very last day of the reserve period, we excluded the auctions performed at those particular days from our regressions.…”

Section: Measuring the Money Market Response To An Mro Auction Outcomementioning

confidence: 99%

Monetary transmission right from the start: On the information content of the Eurosystem's main refinancing operations

Abbassi¹,

Nautz²

2012

The North American Journal of Economics and Finance

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The Eurosystem's main refinancing operations (MRO) are key for the interbank money market and the monetary transmission process in the euro area. This paper investigates how money market rates respond to the information revealed by various aspects of an MRO auction outcome. Our results confirm that the level of MRO rates governed short-term money market rates before the financial crisis. Since the start of the financial crisis, however, the information content of MRO rates has changed. While the levels of MRO rates have lost much of their pre-crisis significance, the spread between the weighted average and the marginal MRO rate has become an important barometer for the actual situation in the money market during the crisis.Keywords: Monetary Policy Implementation; Central bank auctions; European Central Bank; Money markets and Financial Crisis; JEL classification: E43; E52; E58; D44 Non-technical SummaryThe relation between the Eurosystem's main refinancing (MRO) rates and the money market is key for the monetary transmission process in the euro area. The liquidity supply through MROs should ensure that short-term money market rates closely follow the MRO rates and that their volatility remains well contained. This central aim of monetary policy implementation has never been an easy task. Even before the financial crisis, a puzzling and unintended upward trend in the spread between the European overnight rate (Eonia) and the MRO rates indicated that the monetary transmission mechanism is not sufficiently understood. Since the start of the financial crisis, spreads between the ECB's main refinancing rates and the money market rates have been huge and persistent. In order to shed more light on the very beginning of the monetary transmission process in the euro area, this paper investigated how money market rates respond to new information revealed by an MRO auction outcome before and during the financial crisis.Our results show that the financial crisis changed the information content of MRO auctions in two important ways. First, we find that the information contained in the levels of the MRO rates has significantly declined since the outbreak of the crisis in

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Volatility transmission in the European money market

Cited by 31 publications

References 13 publications

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

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

An Interpretation of Interest Rates Variability in Dealer´s Model of Optimal Interest Margin

Monetary transmission right from the start: On the information content of the Eurosystem's main refinancing operations

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