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Measurement errors in GDP and forward-looking monetary policy: The Swiss case

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Author Info

  • Kugler, Peter
  • Jordan, Thomas J.
  • Lenz, Carlos
  • Savioz, Marcel R.

Abstract

This paper analyzes forward-looking rules for Swiss monetary policy in a small structural VAR consisting of four variables. First, the paper looks at the ex ante inflation-output-growth volatility trade-off for a forward-looking policy aiming at a convex combination of a strict inflation and output growth targeting rule implied by this SVAR model. Thereby the paper introduces a new analytical method. Second, the paper considers the effect of measurement errors in GDP on this inflation-output-growth volatility trade-off. Third, the paper works at the impact of changing beliefs about the potential growth rate on the variability of output growth and inflation. Finally the effects of different targets in a forward-looking monetary policy on ex post or unconditional volatility of inflation and output growth is explored by a simulation exercise. --

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Bibliographic Info

Paper provided by Deutsche Bundesbank, Research Centre in its series Discussion Paper Series 1: Economic Studies with number 2004,31.

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Date of creation: 2004
Date of revision:
Handle: RePEc:zbw:bubdp1:2297

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Related research

Keywords: Structural VAR; forward-looking monetary policy; efficiency frontier; GDP measurement errors;

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  1. Hamerle, Alfred & Liebig, Thilo & Scheule, Harald, 2004. "Forecasting Credit Portfolio Risk," Discussion Paper Series 2: Banking and Financial Studies 2004,01, Deutsche Bundesbank, Research Centre.
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Cited by:
  1. Amstad, Marlene & Berentsen, Aleksander, 2002. "Search theory and applied economic research," MPRA Paper 14877, University Library of Munich, Germany.

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