Scandinavian Working Papers in Economics

Research Papers in Economics,
Stockholm University, Department of Economics

No 2009:11: Money-Market Segmentation in the Euro Area: What has Changed During the Turmoil?

Paolo Zagaglia ()
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Paolo Zagaglia: Dept. of Economics, Stockholm University, Postal: Department of Economics, Stockholm University, S-106 91 Stockholm, Sweden

Abstract: I study how the pattern of segmentation in the Euro area money market has been affected by the recent turmoil in financial markets. I use nonparametric estimates of realized volatility to test for volatility spillovers between rates at different maturities. For the pre-turmoil period, exogeneity tests from VAR models suggest the presence of a transmission channel from longer maturities to the overnight. This disappears in the subsample starting in August 9 2007. Quantile measures of comovements in volatility report evidence of an increase in contagion within the longer end of the money market curve.

Keywords: Money market; high-frequency data; time-series methods

JEL-codes: C22; E58

25 pages, April 23, 2009

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