Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153870
Authors: 
Cassola, Nuno
Morana, Claudio
Year of Publication: 
2012
Series/Report no.: 
ECB Working Paper 1437
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 the Lehman Brothers (16 September 2008) "shocks", and two additional factors, of the long memory type, bearing the interpretation of curvature and slope factors. The unfolding of the crisis yielded a significant increase in the persistence and volatility of OIS spreads. We also find evidence of a declining trend in the level and volatility of OIS spreads since December 2008, associated with ECB interest rate cuts and full allotment policy.
Subjects: 
credit/liquidity risk
fractionally integrated heteroskedastic factor vector autoregressive model
money market interest rates
JEL: 
C32
E43
E58
G15
Document Type: 
Working Paper

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