Gradualism, Transparency and Improved Operational Framework: A Look at the Overnight Volatility Transmission
Abstract
This paper proposes a possible way of assessing the effect of interest rate dynamics on changes in the decision-making approach, communication strategy and operational framework of a Central bank. Through a GARCH specification we show that the USA and Euro area displayed a limited but significant spillover of volatility from money market to longer-term rates. We then checked the stability of this phenomenon in the most recent period of improved policymaking and found empirical evidence that the transmission of overnight volatility along the yield curve vanished soon after specific policy changes of the FED and ECB.Download Info
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Paper provided by Center for Financial Studies in its series CFS Working Paper Series with number 2007/16.Length: 27 pages
Date of creation: 09 Mar 2007
Date of revision:
Handle: RePEc:cfs:cfswop:wp200716
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Keywords: Monetary Policy; Yield Curve; GARCH;Find related papers by JEL classification:
- E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
- E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
- G1 - Financial Economics - - General Financial Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-03-24 (All new papers)
- NEP-EEC-2007-03-24 (European Economics)
- NEP-FMK-2007-03-24 (Financial Markets)
- NEP-MAC-2007-03-24 (Macroeconomics)
- NEP-MON-2007-03-24 (Monetary Economics)
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Citations
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.Cited by:
- Ulrike Busch & Dieter Nautz, 2009.
"Controllability and Persistence of Money Market Rates along the Yield Curve: Evidence from the Euro Area,"
SFB 649 Discussion Papers
SFB649DP2009-029, Sonderforschungsbereich 649, Humboldt University, Berlin, Germany.
- Ulrike Busch & Dieter Nautz, 2010. "Controllability and Persistence of Money Market Rates along the Yield Curve: Evidence from the Euro Area," German Economic Review, Verein für Socialpolitik, vol. 11, pages 367-380, 08.
- Busch, Ulrike & Nautz, Dieter, 2009. "Controllability and persistence of money market rates along the yield curve: evidence from the euro area," Discussion Papers 2009/5, Free University Berlin, School of Business & Economics.
- Nautz, Dieter & Schmidt, Sandra, 2009.
"Monetary policy implementation and the federal funds rate,"
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Elsevier, vol. 33(7), pages 1274-1284, July.
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