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

Author

Listed:
  • 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.

Suggested Citation

  • Kugler, Peter & Jordan, Thomas J. & Lenz, Carlos & Savioz, Marcel R., 2004. "Measurement errors in GDP and forward-looking monetary policy: The Swiss case," Discussion Paper Series 1: Economic Studies 2004,31, Deutsche Bundesbank.
  • Handle: RePEc:zbw:bubdp1:2297
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    File URL: https://www.econstor.eu/bitstream/10419/19498/1/200431dkp.pdf
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    References listed on IDEAS

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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.
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    Cited by:

    1. Gunji, Hiroshi & Miura, Kazuki & Yuan, Yuan, 2009. "Bank competition and monetary policy," Japan and the World Economy, Elsevier, vol. 21(1), pages 105-115, January.
    2. Severin Bernhard, 2016. "A real-time GDP data set for Switzerland," Economic Studies 2016-09, Swiss National Bank.
    3. Amstad, Marlene & Berentsen, Aleksander, 2002. "Search theory and applied economic research," MPRA Paper 14877, University Library of Munich, Germany.

    More about this item

    Keywords

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

    JEL classification:

    • E53 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Deposit Insurance
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy

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