Swiss monetary policy in the midst of the euro area: An illusive independence?

May 19, 1999
Centre d'études bancaires and Association Bancaire Tessinoise, Vezia

Summary

The SNB serves most effectively the general interests of Switzerland by conducting an independent monetary policy. If the SNB pursues an independent course, it is able to take into account the specific needs of the Swiss people and the Swiss economy. However, the SNB cannot follow an effective independent monetary policy unless it allows the exchange rate of the Swiss franc to float. In these circumstances, the Swiss franc may appreciate excessively and inflict harm on the Swiss economy. In the lecture it is demonstrated that the SNB is not powerless in the face of such developments. The SNB is always able to aim its monetary policy at stabilising the exchange rate. But it must see to it that it does not relax its course unduly. Otherwise, it runs the risk of fuelling inflation.

If the Swiss franc were linked to the euro, the prospects of harmful exchange rate movements would shrink significantly. The greater stability of the exchange rate would be achieved at the expense of a loss of monetary independence however. Swiss monetary policy would no longer be determined by the SNB, but by the European Central Bank. Swiss interest rates would rise to the levels in the euro area. The attractiveness of the Swiss franc to international investors cease to depend on the credibility and reputation of the SNB. Instead, only the quality of the monetary policy conducted in Frankfurt would henceforth matter.

Download file now

The file can be downloaded with the button below.

Additional files

Related content

Author(s)

  • Georg Rich
    Director of the Swiss National Bank

Your settings

Required: These cookies (e.g. for storing your IP address) cannot be rejected as they are necessary to ensure the operation of the website. These data are not evaluated further.
Analytics: If you consent to this category, data such as IP address, location, device information, browser version and site visitor behaviour will be collected. These data are evaluated for the SNB's internal purposes and are kept for two years.
Third-party: If you consent to this category, third-party services (used, for example, to add social multimedia content to the SNB's website) will be activated which collect personal data, process these data, disclose them abroad - worldwide - and place cookies. The relevant data protection regulations are linked in the 'Privacy statement for the website of the Swiss National Bank'.

Choose your preferred settings:

This website uses cookies, analytics tools and other technologies to provide requested features, content and services, to personalise the content shown, to provide links to social media, and to analyse the use of the website in anonymised form for the purposes of improving usability. Personal data are also disclosed abroad - worldwide - to video service providers and the analytics tools of these providers are used. More information is available under 'Manage settings'.