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Volatility spillover effects in interbank money markets

Author

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  • Pedro Pires Ribeiro

    (Banco de Portugal
    Instituto Universitário de Lisboa, ISCTE–IUL, UNIDE, Complexo INDEG/ISCTE)

  • José Dias Curto

    (Instituto Universitário de Lisboa, ISCTE–IUL, UNIDE, Complexo INDEG/ISCTE)

Abstract

Using daily data from 2006 to 2015, this paper applies alternative multivariate GARCH models and a modified version of the spillover index methodology proposed by Diebold and Yilmaz (Int J Forecast 28(1):57–66, 2012) to test the existence of shock and volatility contagion effects across interbank money markets. Overall, we find evidence that money markets are highly interrelated, exhibiting dynamic cross market effects. Moreover, we emphasize the pertinence of conditional covariances and we show that volatility spillovers are time-varying and very responsive to the major economic events, increasing in periods of higher turbulence, which reinforces the importance of closely monitoring the evolution of money markets.

Suggested Citation

  • Pedro Pires Ribeiro & José Dias Curto, 2017. "Volatility spillover effects in interbank money markets," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 153(1), pages 105-136, February.
    • Handle: RePEc:spr:weltar:v:153:y:2017:i:1:d:10.1007_s10290-016-0268-7
    DOI: 10.1007/s10290-016-0268-7
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    3. Klaus Grobys & Sami Vähämaa, 2020. "Another look at value and momentum: volatility spillovers," Review of Quantitative Finance and Accounting, Springer, vol. 55(4), pages 1459-1479, November.
    4. Tsang, Andrew & Yiu, Matthew S. & Nguyen, Huy Toan, 2021. "Spillover across sovereign bond markets between the US and ASEAN4 economies," Journal of Asian Economics, Elsevier, vol. 76(C).

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    More about this item

    Keywords

    Interbank money markets; Contagion; Spillover index; Multivariate GARCH models;
    All these keywords.

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • F3 - International Economics - - International Finance
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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