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Interest Rate Dynamics and Monetary Policy Implementation in Switzerland

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  • Puriya Abbassi
  • Dieter Nautz
  • Christian Offermanns

Abstract

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.

Suggested Citation

  • 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.
  • Handle: RePEc:ses:arsjes:2010-i-13
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    References listed on IDEAS

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    1. 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.
    2. 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.
    3. 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.
    4. Ernst Baltensperger & Philipp M. Hildebrand & Thomas J. Jordan, 2007. "The Swiss National Bank's monetary policy concept - an example of a 'principles-based' policy framework," Economic Studies 2007-03, Swiss National Bank.
    5. Hassler, Uwe & Nautz, Dieter, 2008. "On the persistence of the Eonia spread," Economics Letters, Elsevier, vol. 101(3), pages 184-187, December.
    6. James D. Hamilton, 2009. "Daily Changes in Fed Funds Futures Prices," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 41(4), pages 567-582, June.
    7. 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.
    8. Sarno, Lucio & Thornton, Daniel L., 2003. "The dynamic relationship between the federal funds rate and the Treasury bill rate: An empirical investigation," Journal of Banking & Finance, Elsevier, vol. 27(6), pages 1079-1110, June.
    9. Dieter Nautz & 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 & Economics, John Wiley & Sons, Ltd., vol. 12(3), pages 287-300.
    10. Nautz, Dieter & Oechssler, Jorg, 2006. "Overbidding in fixed rate tenders--an empirical assessment of alternative explanations," European Economic Review, Elsevier, vol. 50(3), pages 631-646, April.
    11. Newey, Whitney & West, Kenneth, 2014. "A simple, positive semi-definite, heteroscedasticity and autocorrelation consistent covariance matrix," Applied Econometrics, Publishing House "SINERGIA PRESS", vol. 33(1), pages 125-132.
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    Cited by:

    1. 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.
    2. Marlene Amstad & Antoine Martin, 2011. "Monetary policy implementation: common goals but different practices," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 17(Nov).

    More about this item

    Keywords

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

    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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