Interest rate swaps and the transmission mechanism of monetary policy: A quantile connectedness approach

Ioannis Chatziantoniou, David Gabauer and Alexis Stenfors

Economics Letters, 2021, vol. 204, issue C

Abstract: We investigate 1-year interest rate swaps on USD, EUR, JPY and GBP between 2005 and 2020 utilising a quantile connectedness model. This approach allows for a nuanced investigation of connectedness and adds to understanding the monetary policy transmission mechanism within a highly integrated international financial system. Substantial interest rate changes (in either direction) matter for connectedness in financial markets. The results also indicate which currency drives developments depending on the direction of the change in interest rates. The full implementation and replication code — based on R, is available at: https://github.com/GabauerDavid/ConnectednessApproach.

Keywords: Interest rate swaps; Monetary policy transmission mechanism; Quantile vector autoregression (search for similar items in EconPapers)
JEL-codes: C51 E43 F65 G15 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (67)

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Working Paper: Interest Rate Swaps and the Transmission Mechanism of Monetary Policy: A Quantile Connectedness Approach (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:204:y:2021:i:c:s0165176521001683

DOI: 10.1016/j.econlet.2021.109891

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