Euro Money Market Interest Rates Dynamics and Volatility: How They Respond to Recent Changes in the Operational Framework

42 Pages Posted: 21 Oct 2010

See all articles by Caroline Jardet

Caroline Jardet

Banque de France

Gaëlle Le Fol

Université Paris-Dauphine, PSL Research University, CNRS, UMR 7088, DRM, Finance, 75016 Paris, France; National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST)

Date Written: May 2007

Abstract

At the beginning of 2004, the Eurosystem implemented several modifications of its operational framework and liquidity management aiming at enhancing market efficiency. The purpose of this article is to study the effects of theses changes in the spread between the Eonia and the minimum bid rate. Our results reflect that both the operational changes as well as the new liquidity management are responsible for a significant decrease in the interest rate volatility.

Keywords: European money market, Eonia, Operational framework, Liquidity effect

JEL Classification: E52, E58, E43

Suggested Citation

Jardet, Caroline and Le Fol, Gaëlle, Euro Money Market Interest Rates Dynamics and Volatility: How They Respond to Recent Changes in the Operational Framework (May 2007). Banque de France Working Paper No. 167, Available at SSRN: https://ssrn.com/abstract=1694511 or http://dx.doi.org/10.2139/ssrn.1694511

Caroline Jardet (Contact Author)

Banque de France ( email )

31 rue croix des petits champs
75049 Paris Cedex 01
France

Gaëlle Le Fol

Université Paris-Dauphine, PSL Research University, CNRS, UMR 7088, DRM, Finance, 75016 Paris, France ( email )

Place du Maréchal de Lattre de Tassigny
Paris Cedex 16, 75775
France

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST) ( email )

15 Boulevard Gabriel Peri
Malakoff Cedex, 1 92245
France

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