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Money, inflation and the financial crisis: the case of Switzerland

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  • Peter Kugler
  • Dr. Samuel Reynard

Abstract

Unconventional monetary policies have sometimes raised inflation-related fears that have not materialized. Switzerland presents an interesting case, as the central bank reacted to an appreciating currency by injecting Swiss francs through foreign exchange interventions, and bank lending increased considerably throughout the financial crisis. The low inflation that occurred after the crisis can be reconciled with the substantial money growth during the crisis by accounting for the effects of the lower equilibrium velocity and portfolio shifts associated with the Swiss National Bank's foreign exchange interventions.

Suggested Citation

  • Peter Kugler & Dr. Samuel Reynard, 2020. "Money, inflation and the financial crisis: the case of Switzerland," Working Papers 2020-16, Swiss National Bank.
    • Handle: RePEc:snb:snbwpa:2020-16
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    File URL: https://www.snb.ch/en/publications/research/working-papers/2020/working_paper_2020_16
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    More about this item

    Keywords

    Monetary policy; monetary aggregates; inflation; equilibrium velocity; foreign exchange interventions;
    All these keywords.

    JEL classification:

    • 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
    • E41 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Demand for Money
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)

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