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ECB Monetary Policy and Term Structure of Interest Rates in the Euro Area: an Empirical Analysis

  • Filippo COSSETTI

    ()

    (Universita' Politecnica delle Marche, Dipartimento di Economia)

  • Francesco GUIDI

    ()

    (Universita' Politecnica delle Marche, Dipartimento di Economia)

This paper aims to explore the effects of the ECB monetary policy on the Euro area yield curve. Using cointegration techniques, this paper investigates the long-run relationships among the EONIA and Euro area money market interest rates. Results show that presence of cointegration was rejected for maturities longer than six years, implying that European Central Bank monetary policy actions do not exert significant impact on the entire spectrum of the yield curve. In addition, we also consider the transmission of EONIA interest rate volatility to the money market interest rates using EGARCH models. We find that EONIA volatility is transmitted to short and medium-period interest rates, whereas longer-term rates are not affected.

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Paper provided by Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali in its series Working Papers with number 334.

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Length: 30
Date of creation: Nov 2009
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Handle: RePEc:anc:wpaper:334
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