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Exchange rate floor and central bank balance sheets: Simple spillover tests of the Swiss franc

Author

Listed:
  • Adrien Alvero
  • Andreas M. Fischer

Abstract

This paper examines spillover and spillback effects of unconventional monetary policies conducted by the European Central Bank (ECB) and Swiss National Bank (SNB) on the exchange rate's distribution. The empirical setup examines the price response of EURCHF risk reversal to a change in ECB and SNB balance sheets, with a distinction for the period of the minimum exchange rate (floor). The analysis finds only weak evidence of spillover effects from the ECB, while the spillback effect from the SNB balance sheet is robust during the floor period.

Suggested Citation

  • Adrien Alvero & Andreas M. Fischer, 2016. "Exchange rate floor and central bank balance sheets: Simple spillover tests of the Swiss franc," Aussenwirtschaft, University of St. Gallen, School of Economics and Political Science, Swiss Institute for International Economics and Applied Economics Research, vol. 67(02), pages 31-50, August.
    • Handle: RePEc:usg:auswrt:2016:67:02:31-50
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    References listed on IDEAS

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    11. Alexander H. Boote & Seth B. Carpenter & Jane E. Ihrig & Elizabeth C. Klee & Daniel W. Quinn, 2012. "The Federal Reserve's balance sheet: a primer and projections," Finance and Economics Discussion Series 2012-56, Board of Governors of the Federal Reserve System (U.S.).
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    Cited by:

    1. Raphael A. Auer & Cedric Tille, 2016. "The banking sector and the Swiss financial account during the financial and European debt crises:," Aussenwirtschaft, University of St. Gallen, School of Economics and Political Science, Swiss Institute for International Economics and Applied Economics Research, vol. 67(02), pages 69-97, August.
    2. Thomas Nitschka, 2016. "Risk premia on Swiss government bonds and sectoral stock indexes during international crises:," Aussenwirtschaft, University of St. Gallen, School of Economics and Political Science, Swiss Institute for International Economics and Applied Economics Research, vol. 67(02), pages 51-67, August.
    3. Hertrich, Markus, 2020. "Foreign exchange interventions under a one-sided target zone regime and the Swiss franc," Discussion Papers 21/2020, Deutsche Bundesbank.

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    More about this item

    Keywords

    Central bank balance sheets; Spillovers and spillbacks; Risk reversals; OLS regression;
    All these keywords.

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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