IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Disciplined discretion: the German and Swiss monetary targeting frameworks in operation

  • Thomas Laubach
  • Adam S. Posen

Many observers have held up the records of price stability in Germany and in Switzerland as examples of the benefits of a monetary targeting regime. These claims have been juxtaposed in recent years with econometric analyses of Bundesbank policy which have shown an absence of dependable relationship between money growth, inflation, and policy movements. We offer an analysis of actual Bundesbank and Swiss National Bank monetary policy as it operated which explains this puzzling gap between performance and presumed policy. We confirm that neither country is a monetary targeter according to a strict formal definition. We go further, however, and argue that these central banks used their targets as a framework for transparently signaling their intent and explaining their policies to their constituent publics. So used, these targets actually granted the two monetary targeters greater flexibility in responding to shocks and control problems than either idealized monetary targeters or low credibility central banks would have received. Furthermore, the inability to capture these central banks' monetary policies by a simple rule does not mean that there is no pattern to either policy. The close examination of the adoption, design, and operation of their monetary frameworks reveals a surprising similarity in often ignored practice. In this operational light, the difference between inflation targeting as adopted in a number of countries in recent years, and monetary targeting as practiced by its two most-cited successes appears to be very small.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: no

File URL:
Download Restriction: no

Paper provided by Federal Reserve Bank of New York in its series Research Paper with number 9707.

in new window

Date of creation: 1997
Date of revision:
Handle: RePEc:fip:fednrp:9707
Contact details of provider: Postal: 33 Liberty Street, New York, NY 10045-0001
Web page:

More information through EDIRC

Order Information: Email:

No references listed on IDEAS
You can help add them by filling out this form.

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:fip:fednrp:9707. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Amy Farber)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.