Inflation targeting in a small open economy: empirical results for Switzerland

Michael Dueker and Andreas Fischer ()

No 1995-014, Working Papers from Federal Reserve Bank of St. Louis

Abstract: This paper extends McCallum?s (1987) nominal targeting rule to a small open economy by allowing for feedback from the exchange rate. Instead of setting parameters in a McCallum-type targeting rule and simulating, the parameters are estimated using a markov switching model. We argue that a model of discrete parameter changes should be adept at capturing sudden changes in policy regime, such as changes in the degree to which monetary policy admits feedback from the exchange rate. We examine the legitimacy of an inflation targeting rule with occasional exchangerate feedback to describe Swiss monetary policy over the past twenty years.

Keywords: Inflation (Finance); Switzerland (search for similar items in EconPapers)
Date: 1995
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Citations: View citations in EconPapers (4)

Published in Journal of Monetary Economics, 37 (1), pages 89-103 (February 1996)

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Journal Article: Inflation targeting in a small open economy: Empirical results for Switzerland (1996)
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