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Swiss Monetary Targeting 1974-1996: The Role of Internal Policy Analysis

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  • Georg Rich
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    Abstract

    After the switch to a floating exchange rate in 1973, the Swiss National Bank at first adopted annual monetary targets and in the 1990s shifted to a medium-term targeting strategy. In this paper I review the SNB’s internal policy analysis, an aspect of Swiss monetary targeting that has received little attention in the existing literature. I show that money played a key role in setting monetary policy and in communicating the SNB's decisions to the public. Due to the adoption of monetary targets, the SNB was able to reduce the inflation trend to low levels. However, it was less successful in preserving price stability during business-cycle expansions because the monetary targets did not call for a sufficiently pre-emptive policy stance. At the end of 1999, the SNB abandoned monetary targeting in favour of an approach based on inflation forecasts.

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    Bibliographic Info

    Article provided by Swiss Society of Economics and Statistics (SSES) in its journal Swiss Journal of Economics and Statistics.

    Volume (Year): 143 (2007)
    Issue (Month): III (September)
    Pages: 283-329

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    Handle: RePEc:ses:arsjes:2007-iii-3

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    Postal: c/o SNB/BNS, Börsenstrasse 15, PO Box 2800, CH-8022 Zürich
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    Related research

    Keywords: Monetary policy; monetary targets; policy rules; price stability;

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    References

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    1. Benjamin M. Friedman, 1977. "The Inefficiency of Short-Run Monetary Targets for Monetary Policy," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 8(2), pages 293-346.
    2. Rich, Georg, 1997. "Monetary targets as a policy rule: Lessons from the Swiss experience," Journal of Monetary Economics, Elsevier, vol. 39(1), pages 113-141, June.
    3. Andreas M. Fischer & Michel Peytrignet, 1990. "Are Larger Monetary Aggregates Interesting? Some Exploratory Evidence for Switzerland Using Feedback Models," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 126(IV), pages 505-520, December.
    4. Allan Meltzer, 1998. "Monetarism: The issues and the outcome," Atlantic Economic Journal, International Atlantic Economic Society, vol. 26(1), pages 8-31, March.
    5. Buttler, H. -J. & Gorgerat, J. -F. & Schiltknecht, H. & Schiltknecht, K., 1979. "A multiplier model for controlling the money stock," Journal of Monetary Economics, Elsevier, vol. 5(3), pages 327-341, July.
    6. Laubach, T. & Posen, A.S., 1997. "Disciplined Discretion: Monetary Targeting in Germany and Switzerland," Princeton Essays in International Economics 206, International Economics Section, Departement of Economics Princeton University,.
    7. Rich, Georg, 2000. "Monetary Policy without Central Bank Money: A Swiss Perspective," International Finance, Wiley Blackwell, vol. 3(3), pages 439-69, November.
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