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

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  • Georg Rich

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.

Suggested Citation

  • Georg Rich, 2007. "Swiss Monetary Targeting 1974-1996: The Role of Internal Policy Analysis," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 143(III), pages 283-329, September.
  • Handle: RePEc:ses:arsjes:2007-iii-3
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    References listed on IDEAS

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    1. 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.
    2. Rich, Georg, 2000. "Monetary Policy without Central Bank Money: A Swiss Perspective," International Finance, Wiley Blackwell, vol. 3(3), pages 439-469, November.
    3. 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.
    4. Allan Meltzer, 1998. "Monetarism: The issues and the outcome," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 26(1), pages 8-31, March.
    5. 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.
    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. 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.
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    Citations

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    Cited by:

    1. Marvin Goodfriend & Georg Rich, 2010. "Discussion: Ten Years' Experience with the Swiss National Bank's Monetary Policy Strategy," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 146(I), pages 91-105, March.

    More about this item

    Keywords

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

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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