Determinants of the EONIA spread and the financial crisis

Carla Soares; Paulo M. M. Rodrigues

doi:10.1111/manc.12010

Determinants of the EONIA spread and the financial crisis

Carla Soares, Paulo M. M. Rodrigues

NOVA School of Business and Economics (NOVA SBE)

Research output: Contribution to journal › Article › peer-review

7 Citations (Scopus)

Abstract

To understand the impact of the 2007-9 financial crisis, we model the Euro overnight interest rate average (EONIA) spread against the main reference rate as an exponential general autoregressive conditional heteroskedastic (EGARCH) model. Before the fixed rate full allotment policy of the European Central Bank (ECB) (period 2004-8), we follow a two regime approach, however afterwards (2008-9), a conventional EGARCH seems more adequate. The results suggest a greater difficulty during the turmoil for the ECB to steer the EONIA spread. The liquidity policy and in particular the provision of long-term liquidity was effective in reducing market volatility.

Original language	English
Pages (from-to)	82-110
Number of pages	29
Journal	Manchester School
Volume	81
DOIs	https://doi.org/10.1111/manc.12010
Publication status	Published - Oct 2013

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title = "Determinants of the EONIA spread and the financial crisis",

abstract = "To understand the impact of the 2007-9 financial crisis, we model the Euro overnight interest rate average (EONIA) spread against the main reference rate as an exponential general autoregressive conditional heteroskedastic (EGARCH) model. Before the fixed rate full allotment policy of the European Central Bank (ECB) (period 2004-8), we follow a two regime approach, however afterwards (2008-9), a conventional EGARCH seems more adequate. The results suggest a greater difficulty during the turmoil for the ECB to steer the EONIA spread. The liquidity policy and in particular the provision of long-term liquidity was effective in reducing market volatility.",

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AB - To understand the impact of the 2007-9 financial crisis, we model the Euro overnight interest rate average (EONIA) spread against the main reference rate as an exponential general autoregressive conditional heteroskedastic (EGARCH) model. Before the fixed rate full allotment policy of the European Central Bank (ECB) (period 2004-8), we follow a two regime approach, however afterwards (2008-9), a conventional EGARCH seems more adequate. The results suggest a greater difficulty during the turmoil for the ECB to steer the EONIA spread. The liquidity policy and in particular the provision of long-term liquidity was effective in reducing market volatility.

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Determinants of the EONIA spread and the financial crisis

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