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Volatility spillover effects in interbank money markets

Pedro Pires Ribeiro () and José Dias Curto ()
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Pedro Pires Ribeiro: Banco de Portugal
José Dias Curto: Instituto Universitário de Lisboa, ISCTE–IUL, UNIDE, Complexo INDEG/ISCTE

Review of World Economics (Weltwirtschaftliches Archiv), 2017, vol. 153, issue 1, No 4, 105-136

Abstract: Abstract Using daily data from 2006 to 2015, this paper applies alternative multivariate GARCH models and a modified version of the spillover index methodology proposed by Diebold and Yilmaz (Int J Forecast 28(1):57–66, 2012) to test the existence of shock and volatility contagion effects across interbank money markets. Overall, we find evidence that money markets are highly interrelated, exhibiting dynamic cross market effects. Moreover, we emphasize the pertinence of conditional covariances and we show that volatility spillovers are time-varying and very responsive to the major economic events, increasing in periods of higher turbulence, which reinforces the importance of closely monitoring the evolution of money markets.

Keywords: Interbank money markets; Contagion; Spillover index; Multivariate GARCH models (search for similar items in EconPapers)
JEL-codes: C13 C32 F3 G15 (search for similar items in EconPapers)
Date: 2017
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DOI: 10.1007/s10290-016-0268-7

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