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Interest rates and foreign spillovers

Author

Listed:
  • De Santis, Roberto A.
  • Zimic, Srečko

Abstract

We show that medium-term interest rates in the euro area, Japan, UK and US are affected by domestic and foreign shocks. We find that US rates are the main source of spillovers globally and are less exposed to foreign shocks. Foreign spillovers to European rates were negligible only during the sovereign debt crisis and the introduction of more aggressive monetary policies by the ECB. We identify causal relations among asset prices through structural vector autoregressions (SVAR) and magnitude restrictions. We use preliminary regressions on event days to estimate key parameters employed to constrain the structural parameter space of the SVAR. JEL Classification: C3, G2

Suggested Citation

  • De Santis, Roberto A. & Zimic, Srečko, 2019. "Interest rates and foreign spillovers," Working Paper Series 2221, European Central Bank.
  • Handle: RePEc:ecb:ecbwps:20192221
    Note: 185689
    as

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    File URL: https://www.ecb.europa.eu//pub/pdf/scpwps/ecb.wp2221.en.pdf
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    event-study; magnitude restrictions; money market rates; spillovers; SVAR;

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • G2 - Financial Economics - - Financial Institutions and Services

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