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

September 2, 2020
Issue 2020-16

Summary

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.

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Issue:
16
Pages:
37
JEL classification:
E52, E58, E41, E30
Keywords:
Monetary policy, monetary aggregates, inflation, equilibrium velocity, foreign exchange interventions
Year:
2020

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Author(s)

  • Peter Kugler
    Professor at the University of Basle

  • Dr. Samuel Reynard

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