Abstract
We estimate the impact of monetary policy announcements by the Swiss National Bank on the Swiss franc and on the expected path of future short-term interest rates. Monetary policy announcement effects are identified using the identification-through-heteroskedasticity approach. The approach accounts for the simultaneous relation of exchange rates and interest rates. We find that from 2000–11, an announcement of a monetary policy tightening appreciated the nominal Swiss franc on the same day. Importantly, the results indicate that simple methods that do not adequately account for simultaneity between exchange rates and interest rates yield biased and typically non-significant estimates. Our findings further suggest that monetary policy announcements affect medium- to longer-term expectations, which in turn influence the Swiss franc.
Authors
- Fabian Fink
- Lukas Frei
- Thomas Maag
- Tanja Zehnder
JEL codes
- E52
- E58
- E43
- F31