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Interest Rate Transmission and Volatility Transmission along the Yield Curve

  • Avouyi-Dovi, S.
  • Jondeau, E.

In order to analyse the interest rate transmission mechanism, we study daily Euro-rates term structure for the US, Germany, and the UK between 1983 and 1997. We estimate multivariate VECM-GARCH models, which take into account moste of the usual features of financial data (non-stationarity, cointegration, heteroskedasticity, asymmetric effects) The estimates of these models, allows us to study interest rate transmission as well as volatility transmission along the yield curve. Due to the huge number of the parameters it is quite difficult to interpret the empirical result. To avoid this problem we use the impulse responses framework to examine the transmission mechanism along both the yield and volatility curves.

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Paper provided by Banque de France in its series Working papers with number 57.

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Length: 23 pages
Date of creation: 1999
Date of revision:
Handle: RePEc:bfr:banfra:57
Contact details of provider: Postal: Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS
Web page: http://www.banque-france.fr/

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