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Implementing Swiss Monetary Policy: Steering the 3M-Libor with Repo Transactions

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  • Thomas J. Jordan
  • Peter Kugler

Abstract

This paper provides an empirical analysis of the effects of the SNB's operating procedure on the adjustment speed and the volatility of Swiss franc Libor of different maturities. More precisely it presents econometric estimates of the effect of the two characteristics of the repo auctions on the conditional mean and variance of the Libor using daily data from January 2000 to September 2003. The results obtained indicate that the total allotment ratio and the share of the allotment to one-day repos on total allotment have no influence on the adjustment speed of the Libor to the center of the target range. However, the allotment ratio has a clear and highly significant negative influence on the volatility of short-term rates.

Suggested Citation

  • Thomas J. Jordan & Peter Kugler, 2004. "Implementing Swiss Monetary Policy: Steering the 3M-Libor with Repo Transactions," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 140(III), pages 381-393, September.
    • Handle: RePEc:ses:arsjes:2004-iii-5
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    References listed on IDEAS

    as
    1. Juan Ayuso & Rafael Repullo, 2003. "A Model of the Open Market Operations of the European Central Bank," Economic Journal, Royal Economic Society, vol. 113(490), pages 883-902, October.
    2. Gaspar, Vitor & Perez-Quiros, Gabriel & Sicilia, Jorge, 2001. "The ECB Monetary Policy Strategy and the Money Market," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 6(4), pages 325-342, October.
    3. Breitung, Jorg & Nautz, Dieter, 2001. "The empirical performance of the ECB's repo auctions: evidence from aggregated and individual bidding data," Journal of International Money and Finance, Elsevier, vol. 20(6), pages 839-856, November.
    4. Peter Kugler & Thomas J. Jordan, 2004. "Structural Vector Autoregressions and the Analysis of Monetary Policy Interventions: The Swiss Case," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 140(I), pages 67-87, March.
    5. Bindseil, Ulrich, 2004. "Over- and underbidding in central bank open market operations conducted as fixed rate tender," ZEI Working Papers B 03-2004, University of Bonn, ZEI - Center for European Integration Studies.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Vogel, Edgar, 2014. "MRO bidding in the presence of LTROs: an empirical analysis of the pre-crisis period," Working Paper Series 1753, European Central Bank.
    2. Sébastien Kraenzlin & Martin Schlegel, 2012. "Demand for Reserves and the Central Bank's Management of Interest Rates," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 148(IV), pages 531-555, December.
    3. Puriya Abbassi & Dieter Nautz & Christian Offermanns, 2010. "Interest Rate Dynamics and Monetary Policy Implementation in Switzerland," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 146(I), pages 313-340, March.
    4. Ewerhart, Christian & Cassola, Nuno & Valla, Natacha, 2012. "Overbidding in fixed rate tenders: The role of exposure risk," Journal of Banking & Finance, Elsevier, vol. 36(2), pages 539-549.
    5. Fuhrer, Lucas Marc, 2018. "Liquidity in the repo market," Journal of International Money and Finance, Elsevier, vol. 84(C), pages 1-22.
    6. Ewerhart, Christian & Tapking, Jens, 2008. "Repo markets, counterparty risk and the 2007/2008 liquidity crisis," Working Paper Series 909, European Central Bank.
    7. Kedan, Danielle & Stuart, Rebecca, 2014. "Operational targets and the yield curve: The euro area and Switzerland," Economic Letters 04/EL/14, Central Bank of Ireland.
    8. John C. Williams & John B. Taylor, 2009. "A Black Swan in the Money Market," American Economic Journal: Macroeconomics, American Economic Association, vol. 1(1), pages 58-83, January.
    9. Michael Berlemann & Julia Freese, 2013. "Monetary policy and real estate prices: a disaggregated analysis for Switzerland," International Economics and Economic Policy, Springer, vol. 10(4), pages 469-490, December.
    10. Sébastien Kraenzlin, 2007. "The characteristics and development of the Swiss franc repurchase agreement market," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 21(2), pages 241-261, June.
    11. Guender, Alfred V. & Rimer, Oyvinn, 2008. "The implementation of monetary policy in New Zealand: What factors affect the 90-day bank bill rate?," The North American Journal of Economics and Finance, Elsevier, vol. 19(2), pages 215-234, August.
    12. Thomas Jordan & Angelo Ranaldo & Paul Söderlind, 2009. "The implementation of SNB monetary policy," Financial Markets and Portfolio Management, Springer;Swiss Society for Financial Market Research, vol. 23(4), pages 349-359, December.
    13. Nautz, Dieter & Scheithauer, Jan, 2011. "Monetary policy implementation and overnight rate persistence," Journal of International Money and Finance, Elsevier, vol. 30(7), pages 1375-1386.
    14. Dr. Petra Gerlach & Dr. Barbara Rudolf, 2010. "Macroeconomic and interest rate volatility under alternative monetary operating procedures," Working Papers 2010-12, Swiss National Bank.
    15. Sébastien Kraenzlin, 2009. "Interest Rate Setting on the Swiss Franc Repo Market," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 145(III), pages 351-377, September.
    16. Kraenzlin, Sébastien & Schlegel, Martin, 2012. "Bidding behavior in the SNB’s repo auctions," Journal of International Money and Finance, Elsevier, vol. 31(2), pages 170-188.

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    More about this item

    Keywords

    Repo Auctions; Interest Rate Targeting; Interest Rate Volatility;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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