Factors affecting the long-term interest rate and its duration of the European Central Bank: an econometric analysis using regression with life data
by Paraschos Maniatis
International Journal of Applied Nonlinear Science (IJANS), Vol. 2, No. 3, 2016

Abstract: The long-term interest rates of the European Central Bank (ECB) have experienced many irregular changes concerning both durations and levels. This research is an investigation into the factors affecting the level and the durations of the long-term interest rates of the ECB. This problem has been investigated employing a special regression technique called regression with life data, which is essentially borrowed from the reliability analysis. Under proper conceptual elaboration, it can be used to answer these questions in the Eurozones economic scenario. The analysis was carried out in four steps: descriptive statistics, correlational analysis, principal component analysis and regression analysis. The analysis in this research revealed that the frequent interest rate changes by ECB could not effectively control M3 tightening and inflation. The crisis (from 2008 onwards) has been more due to external factors reflected by a significant negative correlation with average US dollar to Euro exchange rate fluctuations.

Online publication date: Fri, 17-Jun-2016

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