Alex Cukierman, 02 November 2018

The size and nature of an economy have a crucial influence on the measures that can be taken in response to major shocks. This column investigates the forex interventions taken by Switzerland and Israel – two small, open economies – in the wake of the Global Crisis. While discretionary interventions are shown to be preferable when policy rates are strictly positive, this is no longer valid when the effective lower bound is reached and unconventional monetary policy is called for. The transfer of reserve management to a sovereign wealth fund is also discussed. 

Philippe Bacchetta, 02 May 2018

The proposed Swiss sovereign money initiative, which will be put to a popular vote in June 2018, would be a drastic reform to the monetary system. If implemented, all sight deposits in Swiss francs would come off commercial bank balance sheets and be deposited at the Swiss National Bank. This column argues that the initiative ignores most of what we know about macroeconomics or monetary economics. It would generate an aggregate loss, reduce stability, interfere with fiscal and monetary policy, and undermine the independence of the central bank. 

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