Template-type: ReDIF-Paper 1.0
Author-Name: Dr. Fabian Fink
Author-Name-First: Fabian
Author-Name-Last: Fink
Author-Person: pfi343
Author-Name: Dr. Lukas Frei
Author-Name-First: Lukas
Author-Name-Last: Frei
Author-Person: pfr421
Author-Name: Dr. Thomas Maag
Author-Name-First: Thomas
Author-Name-Last: Maag
Author-Person: pma917
Author-Name: Dr. Tanja Zehnder
Author-Name-First: Tanja
Author-Name-Last: Zehnder
Author-Person: pze173
Title: The impact of SNB monetary policy on the Swiss franc and longer-term interest rates
Abstract: We estimate the impact of monetary policy rate changes made by the Swiss National Bank on the Swiss franc and on the expected path of future short-term interest rates. We employ an identification-through-heteroskedasticity approach to identify the causal effects. The approach accounts for the simultaneous relation of exchange rates and interest rates. We find that from 2000-2011, an unexpected policy rate hike appreciated the nominal Swiss franc on the same day. The null hypothesis that a policy rate change does not affect the Swiss exchange rates is clearly rejected. Importantly, the results indicate that simple methods that do not adequately account for simultaneity yield biased and typically nonsignificant estimates. Our findings further suggest that policy rate changes affect medium- to longer-term expectations about the stance of monetary policy, which in turn influence the Swiss franc.
Length: 27 pages
Creation-Date: 2020
Contact-Email: forschung@snb.ch
File-URL: https://www.snb.ch/en/publications/research/working-papers/2020/working_paper_2020_01
File-Format: text/html
Number: 2020-01
Classification-JEL: E43, E52, E58, F31, C32
Keywords: Monetary policy shocks, interest rates, exchange rates, identification-through-heteroskedasticity
Handle: RePEc:snb:snbwpa:2020-01