The impact of SNB monetary policy on the Swiss franc and longer-term interest rates

Dr. Fabian Fink, Dr. Lukas Frei, Dr. Thomas Maag and Dr. Tanja Zehnder



JEL classification
E43, E52, E58, F31, C32

Monetary policy shocks, interest rates, exchange rates, identification-through-heteroskedasticity


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.