IDEAS home Printed from https://ideas.repec.org/p/boj/bojwps/06-e-9.html
   My bibliography  Save this paper

Monetary policy conduct of the Swiss National Bank: the experience from 2001 to 2004

Author

Listed:
  • Shinsuke Ohyama

    (Bank of Japan)

  • Junko Tanigawa

    (Bank of Japan)

Abstract

The economy of Switzerland experienced a slowdown and disinflation from 2001 to2003 and the Swiss National Bank (hereafter SNB) aggressively lowered its target range for the three-month Libor rate to the zero lower bound. Owing to the effects of monetary easing and the recovery of the global economy, disinflationary pressures had diminished in the end of 2003 and the SNB started to unwind its expansionary policy in the latter half of 2004. This paper investigates the monetary policy conduct of the SNB during this period and the accompanying financial market reactions, to derive implications for monetary policy conduct. Our main conclusions are twofold. First, estimation of the monetary policy reaction function suggests that the aggressive easing of the SNB from 2001 to 2003 was in line with optimal reaction in the presence of a zero bound on the nominal interest rate. Second, the policy actions taken by the SNB in the easing phase did affect the expectation of market participants on future economic development and monetary policy conducts, while those in the unwinding process of 2004 did not. This fact is consistent with the view that the SNB had taken enough time to have market participants sufficiently expect the near future interest rate hike prior to the actual unwinding process. Such prudent policy conduct was compatible with the robust control in monetary policy, because the SNB judged that the outcome of the low-probability risk of a return to disinflation would be the more serious concern than the possible adverse consequence of a rise in inflation.

Suggested Citation

  • Shinsuke Ohyama & Junko Tanigawa, 2006. "Monetary policy conduct of the Swiss National Bank: the experience from 2001 to 2004," Bank of Japan Working Paper Series 06-E-9, Bank of Japan.
  • Handle: RePEc:boj:bojwps:06-e-9
    as

    Download full text from publisher

    File URL: http://www.boj.or.jp/en/research/wps_rev/wps_2006/data/wp06e09.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Kato, Ryo & Nishiyama, Shin-Ichi, 2005. "Optimal monetary policy when interest rates are bounded at zero," Journal of Economic Dynamics and Control, Elsevier, vol. 29(1-2), pages 97-133, January.
    2. Clarida, Richard & Gali, Jordi & Gertler, Mark, 1998. "Monetary policy rules in practice Some international evidence," European Economic Review, Elsevier, vol. 42(6), pages 1033-1067, June.
    3. Kuttner, Kenneth N., 2001. "Monetary policy surprises and interest rates: Evidence from the Fed funds futures market," Journal of Monetary Economics, Elsevier, vol. 47(3), pages 523-544, June.
    4. Richard H. Clarida & Jordi Gali & Mark Gertler, 1998. "Monetary policy rules in practice," Proceedings, Federal Reserve Bank of San Francisco, issue Mar.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:boj:bojwps:06-e-9. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bank of Japan). General contact details of provider: http://edirc.repec.org/data/bojgvjp.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.