On cross-currency transmissions between US dollar and euro LIBOR-OIS spreads
Using the causality-in-variance and causality-in-mean tests advocated by Hong (2001), we examine volatility and mean transmissions between the US dollar (USD) and euro (EUR) LIBOR-OIS spreads from January 2005 to June 2011. Interestingly, during the global financial crisis period, despite the apparently bidirectional causality-in-mean observed between the two spreads, we find evidence of significant unidirectional causality-in-variance from the EUR to the USD spread, implying information flows driven by the funding behaviors of European financial institutions. On the other hand, during the recent European sovereign debt crisis, we detect no significant causality-in-mean and causality-in-variance between the spreads.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ji, Philip Inyeob & In, Francis, 2010. "The impact of the global financial crisis on the cross-currency linkage of LIBOR-OIS spreads," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 20(5), pages 575-589, December.
- John Taylor & John Williams, 2008. "Further Results on a Black Swan in the Money Market," Discussion Papers 07-046, Stanford Institute for Economic Policy Research.
- Kei Imakubo & Takeshi Kimura & Teppei Nagano, 2008. "Cross-currency transmission of money market tensions," Bank of Japan Review Series 08-E-2, Bank of Japan.
- Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-35, November.
- Tao Wu, 2011. "The U.S. Money Market and the Term Auction Facility in the Financial Crisis of 2007-–2009," The Review of Economics and Statistics, MIT Press, vol. 93(2), pages 617-631, May.
- Ross, Stephen A, 1989. " Information and Volatility: The No-Arbitrage Martingale Approach to Timing and Resolution Irrelevancy," Journal of Finance, American Finance Association, vol. 44(1), pages 1-17, March.
- McAndrews, James J. & Sarkar, Asani & Wang, Zhenyu, 2008. "The effect of the Term Auction Facility on the London Inter-Bank Offered Rate," Staff Reports 335, Federal Reserve Bank of New York, revised 01 Sep 2015.
- Engle, Robert F & Ito, Takatoshi & Lin, Wen-Ling, 1990.
"Meteor Showers or Heat Waves? Heteroskedastic Intra-daily Volatility in the Foreign Exchange Market,"
Econometric Society, vol. 58(3), pages 525-42, May.
- Robert F. Engle & Takatoshi Ito & Wen-Ling Lin, 1988. "Meteor Showers or Heat Waves? Heteroskedastic Intra-Daily Volatility in the Foreign Exchange Market," NBER Working Papers 2609, National Bureau of Economic Research, Inc.
- Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-70, March.
- Albert S. Kyle, 2001. "Contagion as a Wealth Effect," Journal of Finance, American Finance Association, vol. 56(4), pages 1401-1440, 08.
- François-Louis Michaud & Christian Upper, 2008. "What drives interbank rates? Evidence from the Libor panel," BIS Quarterly Review, Bank for International Settlements, March.
- Simon H. Kwan, 2009. "Behavior of Libor in the current financial crisis," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue jan23.
- Go Tamakoshi & Shigeyuki Hamori, 2013. "Volatility and mean spillovers between sovereign and banking sector CDS markets: a note on the European sovereign debt crisis," Applied Economics Letters, Taylor & Francis Journals, vol. 20(3), pages 262-266, February.
- Hong, Yongmiao, 2001. "A test for volatility spillover with application to exchange rates," Journal of Econometrics, Elsevier, vol. 103(1-2), pages 183-224, July.
When requesting a correction, please mention this item's handle: RePEc:eee:riibaf:v:30:y:2014:i:c:p:83-90. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If references are entirely missing, you can add them using this form.