Monetary Policy with a Safe Haven Currency

Abstract:
The Global Financial Crisis has thrown a number of rare challenges to central bankers around the world, notably to those in charge of a small open economy with a safe haven currency. The talk will review the sequence of monetary policy measures adopted since 2008 by the Swiss National Bank in order to insure appropriate monetary conditions at the Zero Lower Bound. The introduction of an exchange rate floor between the Swiss franc and the euro, its subsequent abolition, and the introduction of negative interest rates will be motivated and lessons will be drawn. Open issues and gaps between practice and theory will be highlighted.