Abstract
Empirical study on the factors that induce jumps in interest rates in the euro area is still missing. In this paper, maximum likelihood estimates of I-distribution parameters are extracted using as a first step, an original linear model. According to the contribution of ([1] [2]) in the case of developing a class of Poisson-Gaussian model, we try to enhance the predictive power of this model by distinguishing between a pure Gaussian and Poisson-Gaussian distributions. Such an empirical tool permits to optimizing results through a comparative analysis dealing with the fluctuation of the Euro-interbank offered rate and its statistical descriptive behaviour. The analytical and empirical methods try to evaluate the behavioural success of the ECB intervention in setting interest rates for different maturities. Jumps in euribor interest rate can mainly be linked to surprise decisions of the European Central Bank, and the too frequent meetings of the ECB before November 2001. Despite this special event that leads to a certain lack of predictability, other few day-of-week effects are modelled to prove eventual evidence of bond market overreaction. Empirical results prove that Mondays and Wednesdays are the preponderant days. Regarding monetary policy, negative surprises induce larger jumps than positive ones.
Highlights
“...I think that the Maastricht Treaty and the launching of the ECB were a magnificent success and I think that when you go back to the Delors Report in 1989, it was quite remarkable when that came out, because it
According to the advancement of [1] [4]-[10], we remark that different analyses of Fed Funds in the United States are much wider than the study of EONIA in the eurozone where most studies have concentrated on finding whether the instruments and procedures to implement the monetary policy have repercussion on the overnight rate. [11] studies how the operational procedures and intervention forms of the central banks affect the characteristics and behavior of the one-day rate in the most industrialised countries (Eurozone and G7). [12] models the problem of the intertemporal decision in the reserve market, both for the central bank and for commercial banks
To provide a tutorial exposition of the maximum likelihood estimation, we evaluate results from basic Gaussian and Poisson-Gaussian models and try to compare the eventual illustrative results adopting these processes
Summary
“...I think that the Maastricht Treaty and the launching of the ECB were a magnificent success and I think that when you go back to the Delors Report in 1989, it was quite remarkable when that came out, because it. According to the advancement of [1] [4]-[10], we remark that different analyses of Fed Funds in the United States are much wider than the study of EONIA in the eurozone where most studies have concentrated on finding whether the instruments and procedures to implement the monetary policy have repercussion on the overnight rate. We choose as a reference the interest rate for interbank deposits in the euro zone determined as a 15% trimmed average of the interest rates contributed by the “Panel banks—banks with the highest volume of business in the euro zone money market” It is the rate at which a prime bank is willing to lend funds in euro to another prime bank. This research examines the role of jump-enhanced stochastic processes in modelling the Euro interbank offered rate for different maturities.
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