Implementing Swiss Monetary Policy: Steering the 3M-Libor with Repo Transactions

This paper provides an empirical analysis of the effects of the SNB's operating procedure on the adjustment speed and the volatility of Swiss franc Libor of different maturities. More precisely it presents econometric estimates of the effect of the two characteristics of the repo auctions on the conditional mean and variance of the Libor using daily data from January 2000 to September 2003. The results obtained indicate that the total allotment ratio and the share of the allotment to one-day repos on total allotment have no influence on the adjustment speed of the Libor to the center of the target range. However, the allotment ratio has a clear and highly significant negative influence on the volatility of short-term rates.