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Inflation and unemployment in Switzerland: from 1970 to 2050

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  • Kitov, Oleg
  • Kitov, Ivan

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 University Library of Munich, Germany in its series MPRA Paper with number 28887.

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Date of creation: 14 Feb 2011
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Handle: RePEc:pra:mprapa:28887

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Keywords: Inflation; Unemployment; Labour force; Forecasting; Switzerland;

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References

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  1. 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.
  2. 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.
  3. 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.
  4. 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.
  5. Lisi, Gaetano, 2010. "The unemployment volatility puzzle: the role of the underground economy," MPRA Paper 22689, University Library of Munich, Germany.
  6. 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).
  7. Libich, Jan, 2008. "An explicit inflation target as a commitment device," Journal of Macroeconomics, Elsevier, vol. 30(1), pages 43-68, March.
  8. repec:ebl:ecbull:v:3:y:2008:i:47:p:1-5 is not listed on IDEAS
  9. Kitov, Ivan, 2007. "Inflation, unemployment, labor force change in European countries," MPRA Paper 14557, University Library of Munich, Germany.
  10. Petra Gerlach-Kristen, 2006. "A Two-Pillar Phillips Curve for Switzerland," Working Papers 2006-09, Swiss National Bank.
  11. Veli YILANCI, 2008. "Are Unemployment Rates Nonstationary or Nonlinear? Evidence from 19 OECD Countries," Economics Bulletin, AccessEcon, vol. 3(47), pages 1-5.
  12. James H. Stock & Mark W. Watson, 2008. "Phillips curve inflation forecasts," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 53.
  13. Ivan O. Kitov, 2006. "Inflation, unemployment, labor force change in the USA," Working Papers 28, ECINEQ, Society for the Study of Economic Inequality.
  14. 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.
  15. Caesar Lack, 2006. "Forecasting Swiss inflation using VAR models," Economic Studies 2006-02, Swiss National Bank.
  16. 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.
  17. Samuel Reynard, 2006. "Money and the Great Disinflation," Working Papers 2006-07, Swiss National Bank.
  18. 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.
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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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