Title: Money market interest rate uncertainty and macroeconomic implications
Authors: Carlo Altavilla - European Central Bank (Germany)
Giacomo Carboni - European Central Bank (Germany)
Michele Lenza - European Central Bank (Germany) [presenting]
Abstract: The aim is to evaluate the macroeconomic impact of uncertainty about future interest rates in the Euro area interbank market for unsecured loans. The results suggest that the volatility of money market rates proxied by either realised or implied volatility of future interest rates contains information on the macroeconomic environment over and above standard measures of economic uncertainty. The effects of this uncertainty shock on the economy resemble those associated to a demand shock. Remarkably, these macroeconomic effects remain robust after controlling for a number of uncertainty indicators, stock market volatility, financial stress measures, and volatility of macroeconomic news.