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How to Explain the High Prices in Switzerland?

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  • Christoph Sax
  • Rolf Weder
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    Abstract

    This article challenges the view that a lack of competition and a high level of regulations are the main causes of Switzerland's high prices. First, we point out a number of stylized facts which are inconsistent with this popular view. Second, we econometrically asses the "competition-regulation hypothesis" together with the well-established determinants from the real exchange rate literature in a panel of 22 OECD countries from 1970 to 2004. We find that changes in the terms of trade and the degree of openness, and to a minor extent in government expenditures and the current account, explain the movements in the Swiss real exchange rate reasonably well over the last 35 years. Changes in regulations and competition as well as in relative productivities perform poorly as explanatory variables.

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    Bibliographic Info

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

    Volume (Year): 145 (2009)
    Issue (Month): IV (December)
    Pages: 463-483

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    Handle: RePEc:ses:arsjes:2009-iv-8

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    Related research

    Keywords: Real Exchange Rate; Terms of Trade; Balassa-Samuelson; Regulations; Switzerland;

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    Cited by:
    1. Ulrich Kohli & Jean-Marc Natal, 2014. "The real exchange rate and the structure of aggregate production," Journal of Productivity Analysis, Springer, vol. 42(1), pages 1-13, August.

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