Euro money market spreads during the 2007–? financial crisis

Nuno Cassola and Claudio Morana

Journal of Empirical Finance, 2012, vol. 19, issue 4, 548-557

Abstract: In the paper we investigate the empirical features of euro area money market turbulence during the recent financial crisis. By means of a novel Fractionally Integrated Heteroskedastic Factor Vector Autoregressive model, we find evidence of a deterministic level factor in the EURIBOR-OIS (OIS) spreads term structure, associated with the two waves of stress in the interbank market, following the BNP Paribas (9 August 2007) and Lehman Brothers (16 September 2008) “shocks”, and two additional factors, of the long memory type, bearing the interpretation of curvature and slope factors, respectively. The unfolding of the crisis yields a significant increase in their persistence and volatility. We also find evidence of a declining trend in the level and volatility of OIS spreads since December 2008, associated with ECB liquidity policies.

Keywords: Money market interest rates; Credit/liquidity risk; Fractionally integrated heteroskedastic factor vector autoregressive model (search for similar items in EconPapers)
JEL-codes: C32 E43 E58 G15 (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0927539812000230
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Euro money market spreads during the 2007-? financial crisis (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:empfin:v:19:y:2012:i:4:p:548-557

DOI: 10.1016/j.jempfin.2012.04.003

Access Statistics for this article

Journal of Empirical Finance is currently edited by R. T. Baillie, F. C. Palm, Th. J. Vermaelen and C. C. P. Wolff

More articles in Journal of Empirical Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().