Swiss Monetary Policy: Central Bank Independence and Stabilization Goals
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Swiss Monetary Policy: Central Bank Independence and Stabilization Goals
Credit and Capital Markets – Kredit und Kapital, Vol. 20 (1987), Iss. 4 : pp. 454–466
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Richard C. K. Burdekin, Miami/Florida
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Abstract
Swiss Monetary Policy: Central Bank Independence and Stabilization Goals
The Swiss National Bank (SNB) enjoys perhaps the greatest level of autonomy featured by any of the world’s central banks. For the 1960 – 1983 period, Switzerland also comes second only to West Germany in a ranking of the inflation records of OECD countries. The present paper seeks to provide an objective analysis of Swiss monetary policy that may complement the existing studies of the autonomous central banks in the United States and West Germany. The particular importance of the price-stability goal is assessed in relation to other economic stabilization objectives by means of a reaction function approach that has the rate of growth of the Swiss monetary base as the dependent variable. Econometric results over quarterly data from 1966: 2 – 1983: 4 indicate the state of the federal budget, government purchases, the inflation rate and the exchange rate between the Swiss franc and the Deutsche Mark to be significant explanatory variables. Quantification of a countercyclical response to inflation by the SNB is a most evident feature of the results. The results further suggest that SNB policy tends to offset movements in the federal budget. Like the importance of the price-stability objective, the apparent response to fiscal policy represents a pattern of behavior that supports the formal independence of the SNB.