Controllability and persistence of money market rates along the yield curve: evidence from the euro area

Arbeitspapier

Controllability of longer-term interest rates requires that the persistence of their deviations from the central bank's policy rate (i.e. the policy spreads) remains sufficiently low. This paper applies fractional integration techniques to assess the persistence of policy spreads of euro area money market rates along the yield curve. Independently from anticipated policy rate changes, there is strong evidence for all maturities that policy spreads exhibit long memory. We show that recent changes in the operational framework and the communication strategy of the European Central Bank have significantly decreased the persistence of euro area policy spreads and, thus, have enhanced the central bank's in influence on longer-term money market rates.

Object Details

• ISBN: 393836999X
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Diskussionsbeiträge ; No. 2009/5

Classification and Topics

• Classification: Wirtschaft ; Single Equation Models; Single Variables: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes ; Interest Rates: Determination, Term Structure, and Effects ; Monetary Policy
• Subject: Long memory and fractional integration ; controllability and persistence of interest rates ; new operational framework of the ECB

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Busch, Ulrike ; Nautz, Dieter
• Event: Veröffentlichung
• (who): Freie Universität Berlin, Fachbereich Wirtschaftswissenschaft
• (where): Berlin
• (when): 2009

Further information

• Handle: http://hdl.handle.net/10419/28094
• Last update: 10.03.2025, 11:44 AM CET