Controllability andPersistence of MoneyMarket Rates along theYield Curve: Evidence fromthe Euro Area

Controllability of longer-term interest rates requires that the persis-tence of their deviations from the central bank's policy rate (i.e. thepolicy spreads) remains suffciently low. This paper applies fractionalintegration techniques to assess the persistence of policy spreads ofeuro area money market rates along the yield curve. Independentlyfrom anticipated policy rate changes, there is strong evidence for allmaturities that policy spreads exhibit long memory. We show thatrecent changes in the operational framework and the communicationstrategy of the European Central Bank have signicantly decreasedthe persistence of euro area policy spreads and, thus, have enhancedthe central bank's inuence on longer-term money market rates.