Outdated browser

You are using an outdated browser. DNB.nl works best with:

Applying complexity theory to interest rates: Evidence of critical transitions in the euro area

Working Papers

Published: 04 September 2017

By: Jan Willem van den End

We apply complexity theory to financial markets to show that excess liquidity created by the Eurosystem has led to critical transitions in the configuration of interest rates. Complexity indicators turn out to be useful signals of tipping points and subsequent regime shifts in interest rates. We find that the critical transitions are related to the increase of excess liquidity in the euro area. These insights can help central banks to strike the right balance between the intention to support the financial system by injecting liquidity and potential unintended side-effects on market functioning.
 
Keywords: interest rates, central banks and their policies, monetary policy.
JEL classifications: E43, E58, E52. Working paper no. 567

567 - Applying complexity theory to interest rates: Evidence of critical transitions in the euro area

2.2MB PDF
Download 567 - Applying complexity theory to interest rates: Evidence of critical transitions in the euro area

Discover related articles