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Communicating policy options at the zero bound

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  • Burkhard, Lukas
  • Fischer, Andreas M.

Abstract

This paper examines a special episode in communication practices of the Swiss National Bank (SNB) when short-term interest rates reached the zero bound. Non-sterilized foreign exchange interventions were frequently mentioned as a potential instrument. We ask how the financial markets responded to the SNB's repeated references of non-sterilized interventions? The empirical results with high-frequency data provide strong evidence that SNB intervention references depreciated the domestic currency for several hours. The case study supports the view that communication is an effective tool for monetary policy in unusual situations, as well.

Suggested Citation

  • Burkhard, Lukas & Fischer, Andreas M., 2009. "Communicating policy options at the zero bound," Journal of International Money and Finance, Elsevier, vol. 28(5), pages 742-754, September.
  • Handle: RePEc:eee:jimfin:v:28:y:2009:i:5:p:742-754
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    Citations

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    Cited by:

    1. Gregor Bäurle & Daniel Kaufmann, 2014. "Exchange rate and price dynamics in a small open economy - the role of the zero lower bound and monetary policy regimes," Working Papers 2014-10, Swiss National Bank.
    2. Alan S. Blinder & Michael Ehrmann & Marcel Fratzscher & Jakob De Haan & David-Jan Jansen, 2008. "Central Bank Communication and Monetary Policy: A Survey of Theory and Evidence," Journal of Economic Literature, American Economic Association, pages 910-945.
    3. Kaufmann, Daniel & Bäurle, Gregor, 2013. "Exchange Rate and Price Dynamics at the Zero Lower Bound," Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order 79872, Verein für Socialpolitik / German Economic Association.
    4. Nikola Mirkov & Igor Pozdeev & Paul Söderlind, 2016. "Toward Removal of the Swiss Franc Cap: Market Expectations and Verbal Interventions," Working Papers 2016-10, Swiss National Bank.
    5. Fatum, Rasmus & Pedersen, Jesper, 2009. "Real-time effects of central bank intervention in the euro market," Journal of International Economics, Elsevier, pages 11-20.
    6. Marcel Fratzscher & Oliver Goede & Lukas Menkhoff & Lucio Sarno & Tobias Stöhr, 2015. "When Is Foreign Exchange Intervention Effective? Evidence from 33 Countries," Discussion Papers of DIW Berlin 1518, DIW Berlin, German Institute for Economic Research.
    7. Apergis, Nicholas, 2015. "Newswire messages and sovereign credit ratings: Evidence from European countries under austerity reform programmes," International Review of Financial Analysis, Elsevier, vol. 39(C), pages 54-62.
    8. Hüning, Hendrik, 2017. "Asset market response to monetary policy news from SNB press releases," The North American Journal of Economics and Finance, Elsevier, vol. 40(C), pages 160-177.
    9. repec:eee:reveco:v:51:y:2017:i:c:p:370-390 is not listed on IDEAS
    10. repec:pri:cepsud:161blinder is not listed on IDEAS
    11. Wolfinger, Julia & Köhler, Ekkehard, 2017. "The Draghi-Put: When unexpected words on joint liability speak louder than actions," Annual Conference 2017 (Vienna): Alternative Structures for Money and Banking 168265, Verein für Socialpolitik / German Economic Association.
    12. Hüning, Hendrik, 2016. "Asset market response to monetary policy news from SNB press releases," HWWI Research Papers 177, Hamburg Institute of International Economics (HWWI).
    13. Büchel, Konstantin, 2013. "Do words matter? The impact of communication on the PIIGS' CDS and bond yield spreads during Europe's sovereign debt crisis," European Journal of Political Economy, Elsevier, vol. 32(C), pages 412-431.

    More about this item

    Keywords

    Exchange rate Central bank communication Zero bound;

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F31 - International Economics - - International Finance - - - Foreign Exchange

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