The effectiveness of monetary policy in steering money market rates during the recent financial crisis

Arbeitspapier

The recent financial crisis deeply affected the money market yield curve and thus, potentially, the proper functioning of the interest rate channel of monetary policy transmission. Therefore, we analyze the effectiveness of monetary policy in steering euro area money market rates using two measures: first, the predictability of money market rates on the basis of monetary policy expectations, and second the impact of extraordinary central bank measures on money market rates. We find that market expectations about monetary policy are less relevant for money market rates up to 12 months after August 2007 compared to the pre-crisis period. At the same time, our results indicate that the ECB’s net increase in outstanding open market operations as of October 2008 accounts for at least a 100 basis point decline in Euribor rates. These findings show that central banks have effective tools at hand to conduct monetary policy in times of crises.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECB Working Paper ; No. 1328

Classification and Topics

• Classification: Wirtschaft ; Interest Rates: Determination, Term Structure, and Effects ; Monetary Policy ; Central Banks and Their Policies
• Subject: European Central Bank ; financial crisis ; monetary policy implementation ; monetary transmission mechanism ; money market ; Geldpolitik ; Zinspolitik ; Geldmarkt ; Finanzkrise ; Geldpolitische Transmission ; EU-Staaten

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Abbassi, Puriya ; Linzert, Tobias
• Event: Veröffentlichung
• (who): European Central Bank (ECB)
• (where): Frankfurt a. M.
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/153762
• Last update: 10.03.2025, 11:43 AM CET