Title: Factors affecting the long-term interest rate and its duration of the European Central Bank: an econometric analysis using regression with life data

Authors: Paraschos Maniatis

Addresses: Department of Business Administration, School of Business, Athens University of Economics and Business, Patision 76, GR-104 34, Athens, Greece

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.

Keywords: Eurozone crisis; ECB interest rate period; Tobin regression model; life data; smallest extreme value distribution; long-term interest rates; European Central Bank; econometrics; principal component analysis; PCA; interest rate changes; M3 tightening; inflation; exchange rate fluctuations.

DOI: 10.1504/IJANS.2016.077002

International Journal of Applied Nonlinear Science, 2016 Vol.2 No.3, pp.153 - 183

Received: 02 Oct 2014
Accepted: 28 Jun 2015
Published online: 17 Jun 2016 *

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