Gradualism, transparency and improved operational framework : a look at the overnight volatility transmission

  • This paper proposes a possible way of assessing the effect of interest rate dynamics on changes in the decision-making approach, communication strategy and operational framework of a Central bank. Through a GARCH specification we show that the USA and Euro area displayed a limited but significant spillover of volatility from money market to longer-term rates. We then checked the stability of this phenomenon in the most recent period of improved policymaking and found empirical evidence that the transmission of overnight volatility along the yield curve vanished soon after specific policy changes of the FED and ECB.

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Author:Silvio Colarossi, Andrea ZaghiniORCiDGND
Parent Title (German):Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 2007,16
Series (Serial Number):CFS working paper series (2007, 16)
Document Type:Working Paper
Year of Completion:2007
Year of first Publication:2007
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2007/03/19
GND Keyword:monetary policy; Yield Curve; GARCH; Zinsfuß; USA; Europäische Union; Währungsunion; Federal Reserve Bank <New York, NY>; Europäische Zentralbank; Geldpolitik; GARCH-Prozes
Issue:March 2007
Institutes:Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS)
Dewey Decimal Classification:3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft
Licence (German):License LogoDeutsches Urheberrecht