Please use this identifier to cite or link to this item: http://bura.brunel.ac.uk/handle/2438/26127
Title: Persistence and long memory in monetary policy spreads
Authors: Caporale, GM
Gil-Alana, LA
Keywords: interest rates;persistence;central banks;long memory;fractional integration
Issue Date: 5-Mar-2023
Publisher: Routledge (Taylor and Francis Group)
Citation: Caporale, G.M. and Gil-Alana, L.A. (2023) 'Persistence and long memory in monetary policy spreads', Applied Economics, 56 (20), pp. 2422 - 2433. doi: 10.1080/00036846.2023.2186371.
Abstract: The overnight money market rate is a key monetary policy tool. In recent years, central banks worldwide have developed new monetary policy strategies aimed at keeping its deviations from the policy rate small and short-lived. This paper describes the main instruments used for this purpose by the US Fed, the ECB and the BoE and also their policy responses to the Great Financial Crisis (GFC). Fractional integration and long-memory methods are then applied to investigate how those affected the persistence of policy spreads (i.e. the difference between overnight rates and policy rates) during different sub-periods. It is found that this increased sharply during the GFC but has fallen back in recent years. In the case of the ECB the introduction of the new €-STR benchmark in particular appears to have made monetary policy more effective.
URI: https://bura.brunel.ac.uk/handle/2438/26127
DOI: https://doi.org/10.1080/00036846.2023.2186371
ISSN: 0003-6846
Other Identifiers: ORCiD: Guglielmo Maria Caporale https://orcid.org/0000-0002- 0144-4135
Appears in Collections:Dept of Economics and Finance Research Papers

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