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Determinants of the rate of the Dutch unsecured overnight money market

  • Ronald Heijmans
  • Lola Hern�ndez
  • Richard Heuver

This paper investigates how changes in the monetary policy framework have affected the overnight money market lending rate for the Dutch segment of the euro area during tranquil and crisis times. We present an EGARCH model on the volatility of the overnight lending rate. The results show that modifications of the monetary policy framework in 2004 decreased the volatility of the rate. Since the turmoil of the crisis started the volatility increased again. Our method makes it possible for central banks to monitor the volatility of the rate and the impact of changes in the policy for the whole euro area.

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File URL: http://www.dnb.nl/en/binaries/Working%20Paper%20374_tcm47-287012.pdf
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Paper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 374.

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Date of creation: Mar 2013
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Handle: RePEc:dnb:dnbwpp:374
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Web page: http://www.dnb.nl/en/

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  1. Ronald Heijmans & Richard Heuver & Dani�lle Walraven, 2011. "Monitoring the unsecured interbank money market using TARGET2 data," DNB Working Papers 276, Netherlands Central Bank, Research Department.
  2. van Riet, Ad, 2010. "Euro area fiscal policies and the crisis," Occasional Paper Series 109, European Central Bank.
  3. Gabriel P�rez Quir�s & Hugo Rodr�guez Mendiz�bal, 2012. "Asymmetric Standing Facilities: An Unexploited Monetary Policy Tool," IMF Economic Review, Palgrave Macmillan, vol. 60(1), pages 43-74, April.
  4. 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.
  5. Acharya, Viral V & Merrouche, Ouarda, 2012. "Precautionary hoarding of liquidity and inter-bank markets: Evidence from the sub-prime crisis," CEPR Discussion Papers 8859, C.E.P.R. Discussion Papers.
  6. Gaspar, Vítor & Pérez Quirós, Gabriel & Rodríguez Mendizábal, Hugo, 2004. "Interest rate determination in the interbank market," Working Paper Series 0351, European Central Bank.
  7. Giuseppe Cappelletti & Antonio De Socio & Giovanni Guazzarotti & Enrico Mallucci, 2011. "The impact of the financial crisis on inter-bank funding: evidence from Italian balance sheet data," Questioni di Economia e Finanza (Occasional Papers) 95, Bank of Italy, Economic Research and International Relations Area.
  8. Bartolini, Leonardo & Prati, Alessandro, 2006. "Cross-country differences in monetary policy execution and money market rates' volatility," European Economic Review, Elsevier, vol. 50(2), pages 349-376, February.
  9. Cassola, Nuno & Huetl, Michael, 2010. "The Euro overnight interbank market and ECB's liquidity management policy during tranquil and turbulent times," Working Paper Series 1247, European Central Bank.
  10. Luca Arciero & Ronald Heijmans & Richard Heuver & Marco Massarenti & Cristina Picillo & Francesco Vacirca, 2013. "How to measure the unsecured money market? The Eurosystem's implementation and validation using TARGET2 data," DNB Working Papers 369, Netherlands Central Bank, Research Department.
  11. Alain Durré & Stefano Nardelli, 2008. "Volatility in the Euro area money market: effects from the monetary policy operational framework," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 13(4), pages 307-322.
  12. Carla Soares & Paulo M.M. Rodrigues, 2011. "Determinants of the EONIA spread and the financial crisis," Working Papers w201112, Banco de Portugal, Economics and Research Department.
  13. Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-70, March.
  14. Hamilton, James D, 1996. "The Daily Market for Federal Funds," Journal of Political Economy, University of Chicago Press, vol. 104(1), pages 26-56, February.
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