The Sources of Volatility Transmission in the Euro Area Money Market: From Longer Maturities to the Overnight?
AbstractThis note investigates the transmission of volatility from longer maturities to the overnight segment of the Euro area money market. I use non-parametric estimates of the daily variance of swap rates to test for block exogeneity with respect to the overnight. The results suggest that there exists transmission of volatility shocks from the 1-year swap rate to the overnight market. The reform of the operational framework of March 2004 has improved the segmentation of the market, as it has insulated the overnight segment from spillovers in volatility stemming from swap rates up to 6 months of maturity.
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Bibliographic InfoPaper provided by Stockholm University, Department of Economics in its series Research Papers in Economics with number 2008:5.
Length: 9 pages
Date of creation: 22 May 2008
Date of revision:
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Money Market; High-Frequency Data; Granger Causality;
Other versions of this item:
- Paolo Zagaglia, 2010. "The sources of volatility transmission in the Euro area money market: from longer maturities to the overnight?," Applied Economics Letters, Taylor and Francis Journals, vol. 17(9), pages 865-868.
- C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
- E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-05-31 (All new papers)
- NEP-EEC-2008-05-31 (European Economics)
- NEP-FMK-2008-05-31 (Financial Markets)
- NEP-MAC-2008-05-31 (Macroeconomics)
- NEP-MON-2008-05-31 (Monetary Economics)
- NEP-MST-2008-05-31 (Market Microstructure)
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