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Inflation and unemployment in Switzerland: from 1970 to 2050

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  • Oleg Kitov
  • Ivan Kitov

Abstract

An empirical model is presented linking inflation and unemployment rate to the change in the level of labour force in Switzerland. The involved variables are found to be cointegrated and we estimate lagged linear deterministic relationships using the method of cumulative curves, a simplified version of the 1D Boundary Elements Method. The model yields very accurate predictions of the inflation rate on a three year horizon. The results are coherent with the models estimated previously for the US, Japan, France and other developed countries and provide additional validation of our quantitative framework based solely on labour force. Finally, given the importance of inflation forecasts for the Swiss monetary policy, we present a prediction extended into 2050 based on official projections of the labour force level.

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Paper provided by arXiv.org in its series Papers with number 1102.5405.

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Date of creation: Feb 2011
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Handle: RePEc:arx:papers:1102.5405

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  1. James H. Stock & Mark W. Watson, 2008. "Phillips curve inflation forecasts," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 53.
  2. Ivan O. Kitov & Oleg I. Kitov & Svetlana A. Dolinskaya, 2008. "Inflation as a function of labor force change rate: cointegration test for the USA," Papers 0811.0892, arXiv.org.
  3. Hock, Thorsten & Zimmermann, Patrick, 2005. "Forecasting monetary policy in Switzerland: Some empirical assistance," W.E.P. - Würzburg Economic Papers 60, University of Würzburg, Chair for Monetary Policy and International Economics.
  4. Joseph Deutsch & Yves Fluckiger & Jacques Silber, 2007. "On Various Ways of Measuring Unemployment, with Applications to Switzerland," Economics Working Paper Archive wp_509, Levy Economics Institute.
  5. Veli YILANCI, 2008. "Are Unemployment Rates Nonstationary or Nonlinear? Evidence from 19 OECD Countries," Economics Bulletin, AccessEcon, vol. 3(47), pages 1-5.
  6. Petra Gerlach-Kristen, 2006. "A Two-Pillar Phillips Curve for Switzerland," Working Papers 2006-09, Swiss National Bank.
  7. Ivan O. KITOV & Oleg I. KITOV, 2010. "Dynamics Of Unemployment And Inflation In Western Europe: Solution By The 1- D Boundary Elements Method," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 5(2(12)/Sum), pages 94-113.
  8. Ivan O. Kitov, 2006. "Inflation, unemployment, labor force change in the USA," Working Papers 28, ECINEQ, Society for the Study of Economic Inequality.
  9. Laura Ungureanu & Ion Viorel Matei, 2007. "Nonlinear Problems In Economic Development," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 2(1(2)_Fall).
  10. Lisi, Gaetano, 2010. "The unemployment volatility puzzle: the role of the underground economy," MPRA Paper 22689, University Library of Munich, Germany.
  11. Andrew Atkeson & Lee E. Ohanian., 2001. "Are Phillips curves useful for forecasting inflation?," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 2-11.
  12. repec:ebl:ecbull:v:3:y:2008:i:47:p:1-5 is not listed on IDEAS
  13. Caesar Lack, 2006. "Forecasting Swiss inflation using VAR models," Economic Studies 2006-02, Swiss National Bank.
  14. Libich, Jan, 2008. "An explicit inflation target as a commitment device," Journal of Macroeconomics, Elsevier, vol. 30(1), pages 43-68, March.
  15. Ivan Kitov, 2007. "Inflation, Unemployment, Labor Force Change in European Counties," Mechonomics mechonomics7, Socionet.
  16. Simone Elmer & Thomas Maag, 2009. "The Persistence of Inflation in Switzerland: Evidence from Disaggregate Data," KOF Working papers 09-235, KOF Swiss Economic Institute, ETH Zurich.
  17. Samuel Reynard, 2006. "Money and the Great Disinflation," Working Papers 2006-07, Swiss National Bank.
  18. Thorsten Hock & Patrick Zimmermann, 2005. "Forecasting Monetary Policy in Switzerland: Some Empirical Assistance," Financial Markets and Portfolio Management, Springer, vol. 19(2), pages 201-212, August.
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Cited by:
  1. Touny, Mahmoud, 2013. "Investigate the Long-Run Trade-Off between Inflation and Unemployment in Egypt," MPRA Paper 54561, University Library of Munich, Germany.
  2. Mirdala, Rajmund, 2012. "Interest Rates Determination and Crisis Puzzle (Empirical Evidence from the European Transition Economies)," MPRA Paper 43756, University Library of Munich, Germany.

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