Euro money market spreads during the 2007-? financial crisis
AbstractIn the paper we investigate the empirical features of euro area money market turbulence during the recent financial crisis. By means of a novel Fractionally Integrated Heteroskedastic Factor Vector Autoregressive model, we find evidence of a deterministic level factor in the EURIBOR-OIS (OIS) spreads term structure, associated with the two waves of stress in the interbank market, following the BNP Paribas (9 August 2007) and the Lehman Brothers (16 September 2008) "shocks", and two additional factors, of the long memory type, bearing the interpretation of curvature and slope factors. The unfolding of the crisis yielded a significant increase in the persistence and volatility of OIS spreads. We also find evidence of a declining trend in the level and volatility of OIS spreads since December 2008, associated with ECB interest rate cuts and full allotment policy. JEL Classification: C32, E43, E58, G15
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Bibliographic InfoPaper provided by European Central Bank in its series Working Paper Series with number 1437.
Date of creation: May 2012
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Find related papers by JEL classification:
- C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
- E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-07-08 (All new papers)
- NEP-CBA-2012-07-08 (Central Banking)
- NEP-EEC-2012-07-08 (European Economics)
- NEP-FMK-2012-07-08 (Financial Markets)
- NEP-MON-2012-07-08 (Monetary Economics)
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