Monetary policy in steering the EONIA and POLONIA rates in the Eurosystem and Poland: a comparative analysis

The effectiveness of the monetary policies of the European Central Bank (ECB) and the Narodowy Bank Polski (NBP) is compared directly in terms of influencing the spread between the interbank overnight rate and the main rates of the central banks during periods of different economic conditions, i.e. the global financial crisis of 2008, the European sovereign debt crisis and the period of relative stability. Three categories of determinants of the Euro Overnight Index Average/Polish Overnight Index Average (EONIA/POLONIA) spreads are considered: (1) monetary policy instruments such as open market operations, standing facilities and minimum reserve requirements; (2) measures of liquidity conditions; and (3) market expectations and risk measures. Applying the ARFIMA–GARCH models, we show that the statistical and economic properties of the EONIA and POLONIA spreads are quite different. The EONIA spread has a long memory while the POLONIA spread is characterized by a short memory. This difference is important from the viewpoint of a stabilizing monetary policy. The impact of shocks on the future levels of the spread was stronger for the POLONIA spread, but it was short-lived in comparison with the EONIA spread. Most of the analysed variables significantly influenced the spreads during the financial crisis, while the biggest differences in the impact of determinants between the EONIA and POLONIA spreads occurred during the period of relative stability. Substantial differences also exist between the volatilities of both spreads.     

Cultural change that sticks

When a major change initiative runs aground, leaders often blame their company's culture for pushing it off course. They try to forge ahead by overhauling the culture--a tactic that tends to fizzle, fail, or backfire. Most cultures are too well entrenched to be jettisoned. The secret is to stop fighting your culture--and to work with and within it, until it evolves in the right direction. Today's best-performing companies, such as Southwest Airlines, Apple, and the Four Seasons, understand this, say the authors, three consultants from Booz & Company. These organizations follow five principles for making the most of their cultures: 1. Match strategy to culture. Culture trumps strategy every time, no matter how brilliant the plan, so the two need to be in alignment. 2. Focus on a few critical shifts in behavior. Wholesale change is hard; choose your battles wisely. 3. Honor the strengths of the existing culture. Every culture is the product of good intentions and has strengths; put them to use. 4. Integrate formal and informal interventions. Don't just implement new rules and processes; identify "influencers" who can bring other employees along. 5. Measure and monitor cultural evolution. Otherwise you can't identify backsliding or correct course. When the leaders of Aetna applied these rules while implementing a new strategy in the early 2000s, they reinvigorated the company's ailing culture and restored employee pride. That shift was reflected in the business results, as Aetna went from a $300 million loss to a $1.7 billion gain.