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Interest Rate Dynamics and Monetary Policy Implementation in Switzerland

  • Puriya Abbassi
  • Dieter Nautz
  • Christian J. Offermanns

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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Paper provided by Sonderforschungsbereich 649, Humboldt University, Berlin, Germany in its series SFB 649 Discussion Papers with number SFB649DP2009-062.

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Length: 27 pages
Date of creation: Dec 2009
Date of revision:
Handle: RePEc:hum:wpaper:sfb649dp2009-062
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  1. John B. Taylor & John C. Williams, 2009. "A black swan in the money market," Proceedings, Federal Reserve Bank of San Francisco, issue Jan.
  2. Offermanns, Christian J. & Nautz, Dieter, 2006. "The dynamic relationship between the Euro overnight rate, the ECB´s policy rate and the term spread," Discussion Paper Series 1: Economic Studies 2006,01, Deutsche Bundesbank, Research Centre.
  3. Whitney K. Newey & Kenneth D. West, 1986. "A Simple, Positive Semi-Definite, Heteroskedasticity and AutocorrelationConsistent Covariance Matrix," NBER Technical Working Papers 0055, National Bureau of Economic Research, Inc.
  4. 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.
  5. 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.
  6. 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.
  7. Thomas Jordan & Angelo Ranaldo & Paul Söderlind, 2009. "The implementation of SNB monetary policy," Financial Markets and Portfolio Management, Springer, vol. 23(4), pages 349-359, December.
  8. Lucio Sarno & Daniel L. Thornton, 2002. "The dynamic relationship between the federal funds rate and the Treasury bill rate: an empirical investigation," Working Papers 2000-032, Federal Reserve Bank of St. Louis.
  9. 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, 06.
  10. Hassler, Uwe & Nautz, Dieter, 2008. "On the persistence of the Eonia spread," Economics Letters, Elsevier, vol. 101(3), pages 184-187, December.
  11. 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.
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