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Interest rate dynamics and monetary policy implementation in Switzerland

Summary

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.

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Authors

Additional information

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”.

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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

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JEL-Classification

  • E52
  • E58

Keywords

  • Implementation of Monetary Policy
  • Operational Targets of Monetary Policy
  • Three-Month Rate Targeting
  • Financial Crisis