- Open Access
Interest rate dynamics and monetary policy implementation in Switzerland
Swiss Journal of Economics and Statistics volume 146, pages 313–340 (2010)
The maturity of the operational target of monetary policy is a distinguishing feature of the SNB’s operational framework of monetary policy. While most central banks use targets for the overnight rate to signal the policy-intended interest rate level, the SNB announces a target range for the three-month Libor. This paper investigates the working and the consequences of the SNB’s unique operational framework for the behavior of Swiss money market rates before and during the financial crisis.
Baltensperger, E., P. M. Hildebrand, and T. J. Jordan (2007), “The Swiss National Bank’s Monetary Policy Concept: An Example of a ‘Principle-Based’ Policy Framework”, Economic Study No. 3, Swiss National Bank.
European Central Bank (2009), “The Implementation of Monetary Policy since August 2007”, Monthly Bulletin, July.
Hamilton, James D. (2009), “Daily Changes in Fed Funds Futures Prices”, Journal of Money, Credit, and Banking, 41 (4), pp. 567–582.
Hassler, Uwe, and Dieter Nautz (2008), “On the Persistence of the Eonia Spread”, Economics Letters, 101 (3), pp. 184–187.
Hassler, Uwe, and Jürgen Wolters (2001), “Forecasting Money Market Rates in the Unified Germany”, in: Ralph Friedmann, Lothar Knüppel and Helmut Lütkepohl (eds), Econometric Studies: A Festschrift in Honour of Joachim Frohn, LIT Verlag, Münster, pp. 185–201.
Jordan, Thomas J., and Peter Kugler (2004), “Implementing Swiss Monetary Policy: Steering the 3M-Libor with Repo Transactions”, Swiss Journal of Economics and Statistics, 140 (3), pp. 381–393.
Jordan, Thomas J., A. Ranaldo, and P. Söderlind (2009), “The Implementation of SNB Monetary Policy”, Technical Report No. 4.
Kraenzlin, Sébasiten, and Martin Schlegel (2009), “Bidding Behavior in the SNB’s Repo Auctions”, in: Martin Schlegel, Implementation of Monetary Policy and Money Markets, mimeo, pp. 5–32.
Linzert, Tobias, and Sandra Schmidt (2008), “What Explains the Spread Between the Euro Overnight Rate and the ECB’s Policy Rate?”, Working Paper, 983, European Central Bank.
Nautz, Dieter, and Jörg Oechssler (2006), “Overbidding in Fixed Rate Tenders— An Empirical Assessment of Alternative Explanations”, European Economic Review, 50 (3), pp. 631–646.
Nautz, Dieter, and Christian J. Offermanns (2007), “The Dynamic Relationship between the Euro Overnight Rate, the ECB’s Policy Rate and the Term Spread”, International Journal of Finance and Economics, 12 (3), pp. 287–300.
Newey, Whitney K., and Kenneth D. West (1987), “A Simple, Positive Semi-Definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix”, Econometrica, 55 (3), pp. 703–708.
Sarno, Lucio, and Daniel L. Thornton (2003), “The Dynamic Relationship between the Federal Funds Rate and the Treasury Bill Rate: An Empirical Investigation”,Journal of Banking and Finance, 27, pp. 1079–1110.
Schlegel, Martin (2009), Implementation of Monetary Policy and the Money Market, PhD thesis, WWZ University of Basel, 2009.
Swiss National Bank (2007), The Swiss National Bank, 1907–2007
Taylor, John B., and John C. Williams (2009), “A Black Swan in the Money Market”, American Economic Journal: Macroeconomics, 1 (1), pp. 58–83.
We would like to thank Katrin Assenmacher-Wesche, Sebastien Kraenzlin, Antoine Martin, Dewet Moser, Angelo Ranaldo, participants of an internal SNB seminar and in particular Martin Schlegel for support and helpful comments. This research was supported by the Deutsche Forschungsgemeinschaft through the CRC 649 “Economic Risk”.
About this article
Cite this article
Abbassi, P., Nautz, D. & Offermanns, C.J. Interest rate dynamics and monetary policy implementation in Switzerland. Swiss J Economics Statistics 146, 313–340 (2010). https://doi.org/10.1007/BF03399310
- Implementation of Monetary Policy
- Operational Targets of Monetary Policy
- Three-Month Rate Targeting
- Financial Crisis