Palombini, Edgardo (2003): Volatility and liquidity in the Italian money market.
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This paper constructs unbiased and model-free measures of daily and hourly volatility of the overnight interest rate negotiated on the Italian interbank deposits market (e-MID) using high-frequency transaction data. We find that the largest increases in volatility and the most notable variations of its intraday pattern occur at the end of the reserve maintenance period and at the end of each quarter. The average effect on market volatility of Eurosystem money market operations and interest rate decisions is not significant. We then try to assess the liquidity of the market investigating the relation between trading volume and volatility, finding that even large increases in trading activity do not cause sharp movements in interest rates.
|Item Type:||MPRA Paper|
|Original Title:||Volatility and liquidity in the Italian money market|
|Keywords:||high-frequency data; liquidity; money market; overnight; payment system; reserve requirements; volatility|
|Subjects:||E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E43 - Interest Rates: Determination, Term Structure, and Effects
G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency; Event Studies
C - Mathematical and Quantitative Methods > C1 - Econometric and Statistical Methods and Methodology: General > C14 - Semiparametric and Nonparametric Methods: General
C - Mathematical and Quantitative Methods > C2 - Single Equation Models; Single Variables > C22 - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models
|Depositing User:||Edgardo Palombini|
|Date Deposited:||18. Nov 2012 13:56|
|Last Modified:||13. Feb 2013 06:37|
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