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Persistence and volatility in short-term interest rates

Author

Listed:
  • Nikolaos Panigirtzoglou
  • James Proudman
  • John Spicer

Abstract

It is important for monetary policy makers to know how closely money market rates follow the policy rates they set. This paper looks at the volatility and persistence of divergences between short-term market interest rates away from policy rates. This may also offer insights into the effectiveness of various approaches that central banks employ to smooth interest rate volatility, such as requiring minimum reserves. Using data for Germany, Italy and the United Kingdom, it is found that in all three countries there are significant temporary divergences, although the average divergence is close to zero.

Suggested Citation

  • Nikolaos Panigirtzoglou & James Proudman & John Spicer, 2000. "Persistence and volatility in short-term interest rates," Bank of England working papers 116, Bank of England.
  • Handle: RePEc:boe:boeewp:116
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    File URL: http://www.bankofengland.co.uk/archive/Documents/historicpubs/workingpapers/2000/wp116.pdf
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    References listed on IDEAS

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    7. Haydn Davies, 1998. "Averaging in a framework of zero reserve requirements: implications for the operation of monetary policy," Bank of England working papers 84, Bank of England.
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    Cited by:

    1. Agata Kliber & Paweł Kliber & Piotr Płuciennik & Małgorzata Piwnicka, 2016. "POLONIA dynamics during the years 2006–2012 and the effectiveness of the monetary Policy of the National Bank of Poland," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 43(1), pages 37-59, February.
    2. Iris Biefang-Frisancho Mariscal & Peter Howells, 2004. "Monetary Policy Transparency:Too Good to be True?," Working Papers 0405, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
    3. Anne Vila Wetherilt, 2003. "Money market operations and volatility of UK money market rates," Bank of England working papers 174, Bank of England.
    4. Anne Vila Wetherilt, 2003. "Money market operations and short-term interest rate volatility in the United Kingdom," Applied Financial Economics, Taylor & Francis Journals, vol. 13(10), pages 701-719.
    5. Julius Moschitz, 2009. "Monetary policy implementation and the Euro area money market," Applied Financial Economics, Taylor & Francis Journals, vol. 19(1), pages 39-57.
    6. Iris Biefang-Frisancho Mariscal & Peter Howells, 2007. "Monetary Policy Transparency in the UK: The Impact of Independence and Inflation Targeting," International Review of Applied Economics, Taylor & Francis Journals, vol. 21(5), pages 603-617.

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