Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/229482 
Year of Publication: 
2020
Series/Report no.: 
CESifo Working Paper No. 8664
Publisher: 
Center for Economic Studies and Ifo Institute (CESifo), Munich
Abstract: 
The overnight money market rate is a key monetary policy tool. In recent years, central banks worldwide have developed new monetary policy strategies aimed at keeping its deviations from the policy rate small and short-lived. This paper describes the main instruments used for this purpose by the US Fed, the ECB and the BoE and also their policy responses to the Great Financial Crisis (GFC). Fractional integration and long-memory methods are then applied to investigate how those affected the persistence of policy spreads (i.e., the difference between overnight rates and policy rates) during different sub-periods. It is found that this increased sharply during the GFC but has fallen back in recent years. In the case of the ECB the introduction of the new €-STR benchmark in particular appears to have made monetary policy more effective.
Subjects: 
interest rates
persistence
central banks
long memory
fractional integration
JEL: 
C22
E52
Document Type: 
Working Paper
Appears in Collections:

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.