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Monetary Policy Implementation and Overnight Rate Persistence

Dieter Nautz () and Jan Scheithauer

No SFB649DP2009-053, SFB 649 Discussion Papers from Humboldt University, Collaborative Research Center 649

Abstract: Overnight money market rates are the predominant operational target of monetary policy. As a consequence, central banks have re- designed the implementation of monetary policy to keep the deviations of the overnight rate from the key policy rate small and short-lived. This paper uses fractional integration techniques to explore how the operational framework of four major central banks affects the persis- tence of overnight rates. Our results suggest that a well-communicated and transparent interest rate target of the central bank is a particu- larly important condition for a low degree of overnight rate persistence.

Keywords: Controllability and Persistence of Interest Rates; Oper- ational Framework of Central Banks; Long Memory and Fractional Integration (search for similar items in EconPapers)
JEL-codes: E52 C22 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2009-11
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
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Related works:
Journal Article: Monetary policy implementation and overnight rate persistence (2011) Downloads
Working Paper: Monetary policy implementation and overnight rate persistence (2010) Downloads
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