TITLE:
The Effectiveness of the ECB Announcement Channel
AUTHORS:
Ahmed Hachicha, Afif Masmoudi
KEYWORDS:
Jumps, Euribor Interest Rates, Poisson-Gaussian Model, Negative Surprises
JOURNAL NAME:
Applied Mathematics,
Vol.5 No.6,
April
8,
2014
ABSTRACT: Empirical study on
the factors that induce jumps in interest rates in the euro area is still
missing. In this paper, maximum likelihood estimates of I-distribution parameters
are extracted using as a first step, an original linear model. According to the
contribution of ([1] [2]) in the case of developing a class of
Poisson-Gaussian model, we try to enhance the predictive power of this model by
distinguishing between a pure Gaussian and Poisson-Gaussian distributions. Such
an empirical tool permits to optimizing results through a comparative analysis
dealing with the fluctuation of the Euro-interbank offered rate and its
statistical descriptive behaviour. The analytical and empirical methods try to
evaluate the behavioural success of the ECB intervention in setting interest
rates for different maturities. Jumps in euribor interest rate can mainly be
linked to surprise decisions of the European Central Bank, and the too frequent
meetings of the ECB before November 2001. Despite this special event that leads
to a certain lack of predictability, other few day-of-week effects are
modelled to prove eventual evidence of bond market overreaction. Empirical results
prove that Mondays and Wednesdays are the preponderant days. Regarding monetary
policy, negative surprises induce larger jumps than positive ones.