Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/322059 
Year of Publication: 
2025
Series/Report no.: 
ECB Working Paper No. 3048
Publisher: 
European Central Bank (ECB), Frankfurt a. M.
Abstract: 
We study how short-term interest rate volatility affects the transmission of monetary policy. To identify exogenous changes in volatility, we exploit the pronounced heteroskedasticity visible in the time-series of euro area short-term rates over the past two and a half decades. Interacting the exogenous variation in volatility with high-frequency-identified monetary policy shocks, we find that increases in volatility dampen the effects of monetary policy on output and prices. This dampening effect is visible already at the earlier stages of transmission, including in the pricing and volume of bank lending.
Subjects: 
Interest Rate Volatility
Monetary Policy Transmission
Monetary Policy Implementation
interest
monetary policy
financial market
central bank
banking policy
JEL: 
E44
E52
E58
Persistent Identifier of the first edition: 
ISBN: 
978-92-899-7245-1
Document Type: 
Working Paper

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