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Analyzing The Relationship Between Eonia And Eoniaswap Rates. A Cointegration Approach

  • Codruta Maria FAT

    ()

    (Faculty of Economics and Business Administration, Babes-Bolyai University, Cluj-Napoca)

  • Simona MUTU

    ()

    (Faculty of Economics and Business Administration, Babes-Bolyai University, Cluj Napoca)

The aim of this paper is to analyze the behavior of Eoniaswap rates at different maturities during the 2007-2013 period. This index is representative for the Eurozone interbank swap market and its evolution is significantly influenced by the monetary policy of the European Central Bank. In order to asses this influence, we apply stationarity tests, cointegration tests and a variance decomposition analysis for the interbank swap rates. The results show that Eoniaswap rates exhibit structural breaks,long-term memory and a persistent behavior. The variance of Eoniaswap rates at a certain maturity is influenced by shocks to other maturities of Eoniaswap rates, but shocks coming from Eonia interbank rate are rapidly absorbed. Johansen cointegration test confirms the existence of long-run equilibrium relationship between Eonia and Eoniaswap rates.

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Article provided by Institute of National Economy in its journal Romanian Journal of Economics.

Volume (Year): 38 (2014(XXIV))
Issue (Month): 1(47) (June)
Pages: 197-207

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Handle: RePEc:ine:journl:v:1:y:2014:i:47:p:197-207
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  1. Bartolini, Leonardo & Bertola, Giuseppe & Prati, Alessandro, 2002. "The Overnight Interbank Market: Evidence from the G7 and the Euro Zone," CEPR Discussion Papers 3090, C.E.P.R. Discussion Papers.
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  6. Jongmoo Choi & Elyas Elyasiani, 1997. "Derivative Exposure and the Interest Rate and Exchange Rate Risks of U.S. Banks," Journal of Financial Services Research, Springer, vol. 12(2), pages 267-286, October.
  7. Chaudhry, Mukesh K. & Christie-David, Rohan & Koch, Timothy W. & Reichert, Alan K., 2000. "The risk of foreign currency contingent claims at US commercial banks," Journal of Banking & Finance, Elsevier, vol. 24(9), pages 1399-1417, September.
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