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A Two-Pillar Phillips Curve for Switzerland

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Author Info
Petra Gerlach
Abstract

Monetary aggregates have historically played an important role in Swiss monetary policy, with the Swiss National Bank using money growth targets until 1999. Since 2000, when a new policy framework was introduced that focuses on an inflation forecast, money growth has been used as an indicator variable. Given the continued reliance on monetary aggregates, the question arises how useful money growth is for explaining future price developments. Using Swiss data spanning 1979 to 2005, this paper estimates Phillips curve models that incorporate a measure of "trend" money growth. Using M3, we find that money growth impacts on inflation. M2, however, matters only if the downward shift in nominal interest rates over the sample is taken into account.

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Publisher Info
Article provided by Swiss Society of Economics and Statistics (SSES) in its journal Swiss Journal of Economics and Statistics.

Volume (Year): 143 (2007)
Issue (Month): IV (December)
Pages: 425-448
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Handle: RePEc:ses:arsjes:2007-iv-3

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Related research
Keywords: inflation; money growth; Phillips curve; Switzerland;

Find related papers by JEL classification:
E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
E42 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Monetary Sytsems; Standards; Regimes; Government and the Monetary System
E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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  1. Reynard, Samuel, 2006. "Money and the Great Disinflation," Working Papers 2006-7, Swiss National Bank. [Downloadable!]
  2. Stefan Gerlach & Katrin Assenmacher-Wesche, 2006. "Interpreting Euro area inflation at high and low frequencies," BIS Working Papers 195, Bank for International Settlements. [Downloadable!]
    Other versions:
  3. Cogley, Timothy, 2002. "A Simple Adaptive Measure of Core Inflation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(1), pages 94-113, February.
    Other versions:
  4. Wyplosz, Charles, 2001. "Do We Know How Low Inflation Should Be?," CEPR Discussion Papers 2722, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  5. Sergio Nicoletti Altimari, 2001. "Does money lead inflation in the euro area?," Working Paper Series 063, European Central Bank. [Downloadable!]
  6. Gali, Jordi & Gertler, Mark & Lopez-Salido, J. David, 2001. "European inflation dynamics," European Economic Review, Elsevier, vol. 45(7), pages 1237-1270. [Downloadable!] (restricted)
    Other versions:
  7. Nelson, Edward, 2003. "The Future of Monetary Aggregates in Monetary Policy Analysis," CEPR Discussion Papers 3897, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  8. Albert Jaeger, 2003. "The ECB's Money Pillar: An Assessment," IMF Working Papers 03/82, International Monetary Fund. [Downloadable!]
  9. Gerlach, Stefan, 2003. "The ECB's Two Pillars," CEPR Discussion Papers 3689, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  10. Assenmacher-Wesche, Katrin & Gerlach, Stefan, 2006. "Money Growth, Output Gaps and Inflation at Low and High Frequency: Spectral Estimates for Switzerland," CEPR Discussion Papers 5723, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
    Other versions:
  11. Annick Bruggeman & Gonzalo Camba-Méndez & Björn Fischer & João Sousa, 2005. "Structural filters for monetary analysis - the inflationary movements of money in the euro area," Working Paper Series 470, European Central Bank. [Downloadable!]
  12. Thomas Laubach & Adam Posen, 1997. "Some comparative evidence on the effectiveness of inflation targeting," Research Paper 9714, Federal Reserve Bank of New York. [Downloadable!]
  13. Ernst Baltensperger & Thomas Jordan & Marcel Savioz, 2001. "The demand for M3 and inflation forecasts: An empirical analysis for Switzerland," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 137(2), pages 244-272, June. [Downloadable!] (restricted)
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