This paper assesses the sources of volatility persistence in Euro Area money market interest rates and the existence of linkages relating volatility dynamics. The main findings of the study are as follows. Firstly, there is evidence of stationary long memory, of similar degree, in all series. Secondly, there is evidence of fractional cointegration relationships relating all series, except the overnight rate. The common long memory factor analysis points to a two-factor volatility curve. The most important factor, in terms of proportion of total variance explained, can be interpreted as a level factor (64% of total variance), while the other as a slope factor (13% of total variance). Impulse response analysis and forecast error variance decomposition finally point to non significant forward transmission of liquidity shocks. © 2009 Elsevier Ltd. All rights reserved.

Morana, C., Cassola, N. (2010). Comovements in volatility in the euro money market. JOURNAL OF INTERNATIONAL MONEY AND FINANCE, 29(3), 525-539 [10.1016/j.jimonfin.2009.07.003].

Comovements in volatility in the euro money market

MORANA, CLAUDIO;
2010

Abstract

This paper assesses the sources of volatility persistence in Euro Area money market interest rates and the existence of linkages relating volatility dynamics. The main findings of the study are as follows. Firstly, there is evidence of stationary long memory, of similar degree, in all series. Secondly, there is evidence of fractional cointegration relationships relating all series, except the overnight rate. The common long memory factor analysis points to a two-factor volatility curve. The most important factor, in terms of proportion of total variance explained, can be interpreted as a level factor (64% of total variance), while the other as a slope factor (13% of total variance). Impulse response analysis and forecast error variance decomposition finally point to non significant forward transmission of liquidity shocks. © 2009 Elsevier Ltd. All rights reserved.
Articolo in rivista - Articolo scientifico
Money market interest rates; Liquidity effect; Realized volatility; Fractional integration and cointegration; Fractional vector error correction model
English
2010
29
3
525
539
none
Morana, C., Cassola, N. (2010). Comovements in volatility in the euro money market. JOURNAL OF INTERNATIONAL MONEY AND FINANCE, 29(3), 525-539 [10.1016/j.jimonfin.2009.07.003].
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/10281/26074
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