The Swiss National Bank’s monetary policy concept – an example of a ‘principles-based’ policy framework Ernst Baltensperger, Philipp M. Hildebrand, Thomas J. Jordan No. 3 2007 No. Swiss National Bank Economic Studies Bank Economic Swiss National Copies of Swiss National Bank Economic Studies may be obtained from: Swiss National Bank, Library, Fraumünsterstrasse 8, P.O. Box, CH-8022 Zurich Fax: +41 44 631 81 14 E-mail:
[email protected] This publication is also available on the SNB website (www.snb.ch). Economic Studies represent the views of the authors and do not necessarily reflect those of the Swiss National Bank. ISSN 1661-142X © 2007 Swiss National Bank Swiss National Bank Economic Studies No. 3 2007 The Swiss National Bank’s monetary policy concept – an example of a ‘principles-based’ policy framework Ernst Baltensperger, Philipp M. Hildebrand, Thomas J. Jordan* * We gratefully acknowledge helpful comments from Helen Baumer, Nicole Brändle, Otmar Issing, Caesar Lack, Michel Peytrignet, Enzo Rossi, Jean-Pierre Roth, Marcel R. Savioz, Wolfgang Schill, Lars E.O. Svensson, John Taylor, Charles Wyplosz and an anonymous referee. Contents Abstract (Zusammenfassung, Résumé) 2 Introduction 4 1. What constitutes ‘best-practice’ monetary policy? 6 1.1 The rise of inflation targeting during the 1990s 6 1.2 The current discussion on ‘best-practice’ monetary policy 7 1.3 Some academic proposals 12 2. The SNB’s monetary policy concept 14 2.1 Monetary policy guided by basic principles 14 2.2 Technical assumptions underlying the SNB inflation forecasts 17 2.3 Implementation of monetary policy 18 2.4 Experiences with the new concept 19 3.