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Verbal interventions and exchange rate policies: The case of Swiss franc cap

Nikola Mirkov, Igor Pozdeev and Paul Söderlind ()

Journal of International Money and Finance, 2019, vol. 93, issue C, 42-54

Abstract: We ask whether verbal interventions by the Swiss National Bank (SNB) affected market beliefs in the desired direction during the period from 2011 to 2015, when the SNB imposed a cap on the Swiss franc at 1.20 against the euro. A verbal intervention was a speech by a member of the SNB Governing Board containing the wording “utmost determination” and/or “unlimited quantities”. We show that these verbal interventions lowered uncertainty regarding the future value of euro/Swiss franc exchange rate and steered market beliefs toward franc depreciation, therefore reinforcing the credibility of the Swiss franc cap.

Keywords: Swiss franc; options; FX liquidity; Verbal interventions (search for similar items in EconPapers)
JEL-codes: E58 E44 G12 (search for similar items in EconPapers)
Date: 2019
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Handle: RePEc:eee:jimfin:v:93:y:2019:i:c:p:42-54