Money, inflation and the financial crisis: the case of Switzerland
Peter Kugler and Samuel Reynard
E52, E58, E41, E30
Monetary policy, monetary aggregates, inflation, equilibrium velocity, foreign exchange interventions
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.