Volatility Estimation of Euribor and Equilibrium Forecasting

Llesh Lleshaj – University of Tirana, Faculty of Economy, Tirana, Albania

7th International Scientific ERAZ Conference – ERAZ 2021 – Conference Proceedings: KNOWLEDGE BASED SUSTAINABLE DEVELOPMENT,  Online/virtual, May 27, 2021

ERAZ Conference Proceedings published by: Association of Economists and Managers of the Balkans – Belgrade, Serbia

ERAZ conference partners: Faculty of Economics and Business, Mediterranean University, Montenegro; University of National and World Economy – Sofia, Bulgaria; Faculty of Commercial and Business Studies – Celje, Slovenia; AMBIS University, Prague – Czech Republic; Faculty of Applied Management, Economics and Finance – Belgrade, Serbia

ERAZ Conference 2021 Conference Proceedings: ISBN 978-86-80194-46-2, ISSN 2683-5568, DOI: https://doi.org/10.31410/ERAZ.2021

Abstract: Euribor rates (Euro Interbank Offered Rate) rates are considered to be the most important reference rates in the European money market. The interest rates do provide the basis for the price and interest rates of all kinds of financial products like interest rate swaps, interest rate futures, saving accounts and mortgages. Since September 2014, this index has per­formed with negative rates. In recent years, several European central banks have imposed negative interest rates on commercial banks, as the only way to stimulate their nations’ economies. Under these circumstances, the purpose of this study is to estimate the gap of the negative rates which are still increasing constantly. This fact puts in question the financial stability in many countries and the effect of monetary policy on stimulating economic growth around European countries. According to the daily data 2016 – 2021, this study has analyzed the volatility of the Euribor index related to efficient market hypothesis and volatility clustering. Applying advanced volatility econometric methods, GARCH volatility models are derived and the long-run equilibrium is predicted. Practical Implications are related to the empiri­cal impacts that ought to be taken into consideration by the banking sector and other financial institutions to make decisions with the Euribor index.

ERAZ Conference

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Data (official open data): https://www.suomenpankki.fi/en/Statistics/interest-rates/charts/korot_ kuviot/euriborkorot_pv_chrt_en/