Targeting the Base—the Swiss Experience
At the beginning of 1975, the Swiss National Bank decided to adopt a money stock target. The adjusted monetary base was chosen as an instrument for controlling the growth in the money stock. The aim of this policy was to maintain a stable price level. When the decision for targeting the money stock was taken, the Swiss National Bank realised that a revaluation of the Swiss franc would be inevitable. However, the size of the revaluation came as a surprise. The exchange rate difficulties emerging in the autumn of 1978, in particular, have raised the question whether money stock targeting under a system of flexible exchange rates is the appropriate way of conducting monetary policy in a small open economy.
KeywordsExchange Rate Monetary Policy Central Bank Money Supply Foreign Exchange Market
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