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This paper explores the interest rate transmission mechanism using a broad disaggregated sample of UK deposit and credit products. For a large proportion of rates the adjustment speed is time-varying, switching among four regimes according to the direction of the policy rate and its effect on the disequilibrium gap. In general, this sign asymmetry implies faster adjustment to the long run path when the policy rate revision widens the gap. There is evidence of curvature in the catch-up effect towards equilibrium, namely, large gaps entail a disproportionately faster correction although mainly for deposits. The size of the policy rate change also impacts the adjustment speed. The notable heterogeneity found across financial institutions/products regarding the presence of these nonlinear patterns raises important questions on how to assess the effectiveness of monetary policy. The cross-section heterogeneity uncovered can be explained to some extent by diversification, profit volatility, product range, market concentration and menu costs.

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Updated: 03/09/2010 | Comments: 0 | Rating: Not yet rated | Views: 42

This paper compares four such estimators, realised volatility, realised range, realised power variation and realised bipower variation, by examining their in-sample distributional properties and out-of-sample forecast ranking when the object of interest is the conventional conditional variance.

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Updated: 04/09/2010 | Comments: 0 | Rating: Not yet rated | Views: 47

This paper explores the interest rate transmission mechanism on the basis of a large disaggregated sample of British monthly deposit and loan rates 1993-2005 for seven key products. The focus is on the adjustment speed towards the long run equilibrium rate.

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Updated: 03/09/2010 | Comments: 0 | Rating: Not yet rated | Views: 78

This paper presents a comprehensive study of whether augmenting generalized autoregressive conditional heteroskedasticity (GARCH) models by lagged realized volatilitities or by trading volume produces incremental forecast accuracy.

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Updated: 01/09/2010 | Comments: 0 | Rating: Not yet rated | Views: 17

This article presents a comprehensive analysis of the relative merits of trading volume, intraday and overnight returns for daily volatility prediction.

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Updated: 05/09/2010 | Comments: 0 | Rating: Not yet rated | Views: 162