The SNB pegged their currency to the Euro in order to devalue it, but they still had deflation (or really low inflation). It did move the exchange rate -- which Scott Sumner thinks is a sufficient indication is an indicator [Sumner disagreed with that characterization, however see here**] for looser monetary policy.
The SNB has decided to let their currency appreciate again after the devaluation failed to produce inflation or spur growth -- as would be predicted by a liquidity trap model.
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** Sumner:
"BTW, Kuroda is engaged in monetary offset (the yen has recently fallen from 109 to 118)"
I would say engaging in monetary offset is looser policy; tighter policy would stand to see a rise in the Yen.
Updated with footnote 1/15/2015 11:48 PST
Jason,
ReplyDeleteWhat does your model predict about Swiss prices going forwarded?
I will update the model for Switzerland to get exact numbers and post a link here, but the prediction is continued inflation near zero (or slight deflation). You can imagine linearly extending the price level line in the graph at this link:
Deletehttp://informationtransfereconomics.blogspot.com/2014/08/lowflation-is-meaningful-concept.html
Essentially, the same outlook as Japan in its 'lost decade'.
Here is the graph with the prediction (essentially inflation = zero for the next year, on average):
Deletehttp://informationtransfereconomics.blogspot.com/2015/01/floating-swiss-franc-wont-change-price.html