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Money-Market Segmentation in the Euro Area: What has Changed During the Turmoil?




I study how the pattern of segmentation in the Euro area money market has been affected by the recent turmoil in financial markets. I use nonparametric estimates of realized volatility to test for volatility spillovers between rates at different maturities. For the pre-turmoil period, exogeneity tests from VAR models suggest the presence of a transmission channel from longer maturities to the overnight. This disappears in the subsample starting in August 9 2007. Quantile measures of comovements in volatility report evidence of an increase in contagion within the longer end of the money market curve.

Suggested Citation

  • Zagaglia, Paolo, 2009. "Money-Market Segmentation in the Euro Area: What has Changed During the Turmoil?," Research Papers in Economics 2009:11, Stockholm University, Department of Economics.
  • Handle: RePEc:hhs:sunrpe:2009_0011

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    References listed on IDEAS

    1. 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.
    2. Torben G. Andersen & Tim Bollerslev & Francis X. Diebold, 2002. "Parametric and Nonparametric Volatility Measurement," Center for Financial Institutions Working Papers 02-27, Wharton School Center for Financial Institutions, University of Pennsylvania.
    3. R. Beaupain & A. Durre, 2008. "The interday and intraday patterns of the overnight market: Evidence from an electronic platform," Post-Print hal-00393019, HAL.
    4. Carlo Rosa & Giovanni Verga, 2008. "The Impact of Central Bank Announcements on Asset Prices in Real Time," International Journal of Central Banking, International Journal of Central Banking, vol. 4(2), pages 175-217, June.
    5. Lorenzo Cappiello & Bruno Gérard & Arjan Kadareja & Simone Manganelli, 2014. "Measuring Comovements by Regression Quantiles," Journal of Financial Econometrics, Society for Financial Econometrics, vol. 12(4), pages 645-678.
    6. Robert F. Engle & Simone Manganelli, 2004. "CAViaR: Conditional Autoregressive Value at Risk by Regression Quantiles," Journal of Business & Economic Statistics, American Statistical Association, vol. 22, pages 367-381, October.
    7. Roberto Rigobon, 2002. "Contagion: How to Measure It?," NBER Chapters,in: Preventing Currency Crises in Emerging Markets, pages 269-334 National Bureau of Economic Research, Inc.
    8. Idier, Julien & Nardelli, Stefano, 2008. "Probability of informed trading on the euro overnight market rate: an update," Working Paper Series 987, European Central Bank.
    9. Edwards, Sebastian & Rigobon, Roberto, 2002. "Currency crises and contagion: an introduction," Journal of Development Economics, Elsevier, vol. 69(2), pages 307-313, December.
    10. Cappiello, Lorenzo & Gérard, Bruno & Kadareja, Arjan & Manganelli, Simone, 2006. "Financial integration of new EU Member States," Working Paper Series 683, European Central Bank.
    11. Durré, Alain & Beaupain, Renaud, 2008. "The interday and intraday patterns of the overnight market: evidence from an electronic platform," Working Paper Series 988, European Central Bank.
    12. Julien Idier & Stefano Nardelli, 2011. "Probability of informed trading on the euro overnight market rate," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 16(2), pages 131-145, April.
    13. Francisco Alonso & Roberto Blanco, 2005. "Is the volatility of the EONIA transmitted to longer-term euro money market interest rates?," Working Papers 0541, Banco de España;Working Papers Homepage.
    14. Hansen, Peter R. & Lunde, Asger, 2006. "Realized Variance and Market Microstructure Noise," Journal of Business & Economic Statistics, American Statistical Association, vol. 24, pages 127-161, April.
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    Cited by:

    1. Bertrand Blancheton & Christian Bordes & Samuel Maveyraud & Philippe Rous, 2012. "Risk of liquidity and contagion of the crisis on the US, UK and Euro Zone money markets," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-01098954, HAL.

    More about this item


    Money market; high-frequency data; time-series methods;

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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