The Role of Eonia in the Dynamics of Short-Term Interbank Rates
To signal monetary policies and market expectations, we apply a fractionally cointegrated vector autoregressive (FCVAR) model, aiming to analyse the expectations hypothesis of term structure (EHTS), persistence in the Euro OverNight Index Average (Eonia) spread and permanent-transitory decomposition...
| Autores: | , , |
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| Tipo de recurso: | artículo |
| Fecha de publicación: | 2020 |
| País: | España |
| Institución: | Universidad de Huelva (UHU) |
| Repositorio: | Arias Montano. Repositorio Institucional de la Universidad de Huelva |
| Idioma: | inglés |
| OAI Identifier: | oai:ariasmontano.uhu.es:10272/18159 |
| Acceso en línea: | http://hdl.handle.net/10272/18159 |
| Access Level: | acceso abierto |
| Palabra clave: | Eonia rate Long memory Fractional cointegration Euribor rate Persistence of interest rates |
| Sumario: | To signal monetary policies and market expectations, we apply a fractionally cointegrated vector autoregressive (FCVAR) model, aiming to analyse the expectations hypothesis of term structure (EHTS), persistence in the Euro OverNight Index Average (Eonia) spread and permanent-transitory decomposition using a novel approach. We use a monthly frequency sample for the 3- month Euribor rate and Eonia rate, covering the period from January 1999 to February 2019. The results obtained confirm the EHTS and show evidence of a high persistence of the spread, which means that shocks may impede effectiveness in monetary policy and that the European Central Bank (ECB) loses control over interest rates. Additionally, according to permanent-transitory decomposition, we determine that the Eonia rate has a permanent component and thus dominates the common trend in the cointegration system. In sum, if the ECB wants to keep the interbank market interest rates under control, it must contemplate the evolution of the Eonia rate. |
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