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The dynamic relationship between the euro overnight rate, the ECB's policy rate and the term spread

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  • Dieter Nautz

    (Goethe University Frankfurt, Germany)

  • Christian J. Offermanns

    (Goethe University Frankfurt, Germany)

Abstract

This paper investigates how the dynamic adjustment of the European overnight rate Eonia to the term spread and the European Central Bank's (ECB's) policy rate is affected by rate expectations and the operational framework of the ECB. In line with recent evidence found for the US and Japan, the reaction of the Eonia to the term spread is non-symmetric. Moreover, the response of the Eonia to the policy rate depends on both, the repo auction format and the position of the Eonia in the ECB's interest rate corridor. Copyright © 2006 John Wiley & Sons, Ltd.

Suggested Citation

  • Dieter Nautz & Christian J. Offermanns, 2007. "The dynamic relationship between the euro overnight rate, the ECB's policy rate and the term spread," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 12(3), pages 287-300.
  • Handle: RePEc:ijf:ijfiec:v:12:y:2007:i:3:p:287-300
    DOI: 10.1002/ijfe.313
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    More about this item

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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