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Ten years’ experience with the Swiss National Bank’s monetary policy strategy

Summary

In December 1999 the Swiss National Bank (SNB) abandoned monetary targeting and introduced a new monetary policy strategy. The cornerstones of the new framework are an explicit definition of what the SNB considers to be price stability, a forecast of inflation over a three-year horizon, and a target range for the three-month Swiss franc Libor. The strategy lived up to expectations in every respect and contributed to strengthening the SNB’s credibility. In particular, the new framework’s flexibility proved successful in times of financial stress. The term reference interest rate contains an automatic monetary stabilizer that has insulated the nonfinancial sector from much of the turbulence. The major challenge lying ahead is sustained accuracy in the assessment of future inflation.

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Correspondence to Enzo Rossi.

Additional information

We would like to thank Marvin Goodfriend and Georg Rich for their insightful discussion of a previous version of the paper. We also thank Jean-Mark Natal, Martin Schlegel and Markus von Allmen for their comments and assistance. This paper takes into account developments until the third quarter 2009.

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Jordan, T.J., Peytrignet, M. & Rossi, E. Ten years’ experience with the Swiss National Bank’s monetary policy strategy. Swiss J Economics Statistics 146, 9–90 (2010). https://doi.org/10.1007/BF03399293

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JEL-Classification

  • E5

Keywords

  • Monetary policy strategy
  • inflation targeting
  • monetary policy rules
  • inflation forecasts
  • financial crisis
  • unconventional monetary policy