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Monetary policy implementation and the Euro area money market

Listed author(s):
  • Julius Moschitz

This article studies the effects of monetary policy implementation on the Euro area money market. In particular, volatility of interest rates with various maturities and volatility transmission along the yield curve are analysed. It is found that the way how monetary policy is implemented affects volatility of most money market rates, except the 12-month rate. These effects are strongest at the short end of the yield curve. Notwithstanding, firms' investment and households' consumption decisions depend mostly on longer-term rates indicating that the operating procedures in place implement monetary policy decisions very efficiently, without inducing real costs on the economy. Furthermore, some calendar day effects, a U-shaped volatility curve and strong evidence in favour of the expectation hypothesis are documented.

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File URL: http://www.tandfonline.com/doi/abs/10.1080/09603100701765158
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Article provided by Taylor & Francis Journals in its journal Applied Financial Economics.

Volume (Year): 19 (2009)
Issue (Month): 1 ()
Pages: 39-57

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Handle: RePEc:taf:apfiec:v:19:y:2009:i:1:p:39-57
DOI: 10.1080/09603100701765158
Contact details of provider: Web page: http://www.tandfonline.com/RAFE20

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  1. Cassola, Nuno & Morana, Claudio, 2010. "Comovements in volatility in the euro money market," Journal of International Money and Finance, Elsevier, vol. 29(3), pages 525-539, April.
  2. Quiros, Gabriel Perez & Mendizabal, Hugo Rodriguez, 2006. "The Daily Market for Funds in Europe: What Has Changed with the EMU?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 38(1), pages 91-118, February.
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  4. Benjamin H Cohen, 1999. "Monetary Policy Procedures and Volatility Transmission along the Yield Curve," CGFS Papers chapters,in: Bank for International Settlements (ed.), Market Liquidity: Research Findings and Selected Policy Implications, volume 11, pages 1-22 Bank for International Settlements.
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