Hoerova and Monnet (2011) view market  6  BIS central bankers’ speeches  money market (as demand might not be fully matched by supply) and segmentation in the market between maturities over and below 30 days. At the same time, by reducing liquidity risk, the LCR may lead to lower liquidity risk premia. The overall effect of these two countervailing forces is unclear though. While there could be an overall impact on the difference between short and longer-term rates, to assess the overall impact on the monetary policy transmission, one would need to see whether the transmission from short to longerterm rates would be also affected. However, it remains to be seen whether unsecured lending beyond 30 days will revive after the crisis. As mentioned, this new set of liquidity requirements is expected to have important consequences for limiting solvency risk and encouraging good risk management. In fact, the regulation is expected to bring an overall positive effect on the functioning of the money market by internalising the negative externalities for financial stability and monetary policy, i.e. reducing information asymmetries concerning banks’ liquidity risk exposure and their liquidity risk bearing capacity, creating the conditions for a better functioning of the money market.17 This has to be combined with actions ensuring a proper functioning of the money market (such as oversight of reference rates along the lines recently proposed by the European Commission).
Philipp M Hildebrand: From monetarism to the inflation forecast 30 years of Swiss monetary policy Public lecture by Dr Philipp M Hildebrand, Member of the Governing Board of the Swiss National Bank, at the University of Berne, Berne, 23 November 2004. The complete speech can be found in German on the Swiss National Bank’s website (www.snb.ch). *  *  *  Following the collapse of the Bretton Woods system, the Swiss National Bank, in 1974, was one of the first central banks to adopt a monetary policy with monetary aggregates as intermediate targets. The monetarist phase of the National Bank lasted until 1999. During this phase, the National Bank repeatedly changed its monetary targets. In the course of time, it adopted an increasingly pragmatic monetary policy and paid more attention to the development of the exchange rate. In December 1999, the SNB introduced its current monetary policy concept, which uses an inflation forecast as the basis for monetary policy decisions. On the whole, monetarist ideas had a positive influence on Switzerland’s monetary policy. They brought the realisation that price stability is important, thus furthering the process of disinflation in the 1970s and 1980s. Moreover, monetarism caused the SNB to make its monetary policy more transparent and rule-based. The use of monetary aggregates as intermediate targets, however, was more problematic. With money demand proving to be too instable, simply controlling money supply growth was not sufficient to achieve price stability.