Kugler, Peter Jordan, Thomas J. Lenz, Carlos Savioz, Marcel R.
Year of Publication:
Discussion paper Series 1 / Volkswirtschaftliches Forschungszentrum der Deutschen Bundesbank 2004,31
This paper analyzes forward-looking rules for Swiss monetary policy in a small structural VAR consisting of four variables. First, the paper looks at the ex ante inflation-output-growth volatility trade-off for a forward-looking policy aiming at a convex combination of a strict inflation and output growth targeting rule implied by this SVAR model. Thereby the paper introduces a new analytical method. Second, the paper considers the effect of measurement errors in GDP on this inflation-output-growth volatility trade-off. Third, the paper works at the impact of changing beliefs about the potential growth rate on the variability of output growth and inflation. Finally the effects of different targets in a forward-looking monetary policy on ex post or unconditional volatility of inflation and output growth is explored by a simulation exercise.
Structural VAR forward-looking monetary policy efficiency frontier GDP measurement errors