The Role of Eonia in the Dynamics of Short-Term Interbank Rates

To signal monetary policies and market expectations, we apply a fractionally cointegrated vector autoregressive (FCVAR) model, aiming to analyse the expectations hypothesis of term structure (EHTS), persistence in the European OverNight Index Average (Eonia) spread and permanent-transitory decomposition using a novel approach. We use a monthly frequency sample for the 3-month Euribor rate and Eonia rate, covering the period from January 1999 to February 2019. The results obtained confirm the EHTS and show evidence of a high persistence of the spread, which means that shocks may impede effectiveness in monetary policy and that the European Central Bank (ECB) loses control over interest rates. Additionally, according to permanent-transitory decomposition, we determine that the Eonia rate has a permanent component and thus dominates the common trend in the cointegration system. In sum, if the ECB wants to keep the interbank market interest rates under control, it must contemplate the evolution of the Eonia rate. Key words: Eonia rate, Long memory and fractional cointegration, Euribor rate, Persistence of interest rates, Permanent-transitory decomposition. JEL: C22, E52, G15 Uloga Eonia stope u dinamici kratkoročnih međubankarskih stops Kako bismo signalizirali monetarnu politiku i tržišna očekivanja, primenjujemo frakciono kointegrisani vektorski autoregresivni model (FCVAR), u cilju analiziranja hipoteze o očekivanjima u pogledu ročne strukture (EHTS), perzistentnosti spread-a Evro prekonoćnog prosečnog indeksa (Eonia) i permanentno-tranzitornoj dekompoziciji primenom novog pristupa. Koristimo uzorak mesečne frekvencije za tromesečnu Euribor i Eonia stopu, pokrivajući period od januara 1999. do februara 2019. godine. Dobijeni rezultati potvrđuju EHTS i upućuju na visoku perzistentnost spread-a, što znači da šokovi mogu ograničiti efikasnost monetarne politike i da Evropska centralna banka (ECB) gubi kontrolu nad kamatnim stopama. Pored toga, prema permanentno-tranzitornoj dekompoziciji, utvrđujemo da Eonia stopa ima permanentnu komponentu i na taj način dominira u zajedničkom trendu kointegracionog sistema. Ukratko, ako ECB želi da drži kamatne stope međubankarskog tržišta pod kontrolom, mora da razmotri razvoj Eonija stope. Ključne reči: Eonia stopa, dugoročna memorija i frakciona kointegracija, Euribor stopa, perzistentnost kamatnih stopa, permanentno-tranzitorna dekompozicija.