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Unemployment and Monetary Policy in Switzerland

  • Peter Kugler
  • George Sheldon
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    This paper investigates the impact of the monetary policy change of the Swiss National Bank (SNB) in 1999 on the Swiss labor market on the basis of a Phillips relationship. Theoretical considerations as well as previous empirical work suggest that the SNB's shift to a more inflation-targeted policy should have increased real-wage flexibility and lowered the NAIRU, the sacrifice ratio, and the level and persistence of inflation in Switzerland. Our results tend to confirm these expectations, although a number of the measured effects are not statistically significant.

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    File URL: http://www.sjes.ch/papers/2010-I-7.pdf
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    Article provided by Swiss Society of Economics and Statistics (SSES) in its journal Swiss Journal of Economics and Statistics.

    Volume (Year): 146 (2010)
    Issue (Month): I (March)
    Pages: 185-208

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    Handle: RePEc:ses:arsjes:2010-i-7
    Contact details of provider: Postal: c/o SNB/BNS, Börsenstrasse 15, PO Box 2800, CH-8022 Zürich
    Phone: +41 (0)44 631 32 34
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    1. Douglas O. Staiger & James H. Stock & Mark W. Watson, 1997. "How Precise Are Estimates of the Natural Rate of Unemployment?," NBER Chapters, in: Reducing Inflation: Motivation and Strategy, pages 195-246 National Bureau of Economic Research, Inc.
    2. Michael Gerfin & Michael Lechner, 2002. "A Microeconometric Evaluation of the Active Labour Market Policy in Switzerland," Economic Journal, Royal Economic Society, vol. 112(482), pages 854-893, October.
    3. Laurence Ball, 1994. "What Determines the Sacrifice Ratio?," NBER Chapters, in: Monetary Policy, pages 155-193 National Bureau of Economic Research, Inc.
    4. Marc Zelmer & Andrea Schaechter, 2000. "Adopting Inflation Targeting: Practical Issues for Emerging Market Countries," IMF Occasional Papers 202, International Monetary Fund.
    5. Luca Benati, 2003. "Evolving Post-World War II U.K. Economic Performance," Computing in Economics and Finance 2003 171, Society for Computational Economics.
    6. Layard, Richard & Nickell, Stephen, 1986. "Unemployment in Britain," Economica, London School of Economics and Political Science, vol. 53(210(S)), pages S121-69, Supplemen.
    7. Layard, Richard & Nickell, Stephen & Jackman, Richard, 2005. "Unemployment: Macroeconomic Performance and the Labour Market," OUP Catalogue, Oxford University Press, number 9780199279173, March.
    8. Pete Richardson & Laurence Boone & Claude Giorno & Mara Meacci & David Rae & David Turner, 2000. "The Concept, Policy Use and Measurement of Structural Unemployment: Estimating a Time Varying NAIRU Across 21 OECD Countries," OECD Economics Department Working Papers 250, OECD Publishing.
    9. Svensson, Lars E O, 1994. "The Simplest Test of Inflation Target Credibility," CEPR Discussion Papers 940, C.E.P.R. Discussion Papers.
    10. Corbo, Vittorio & Landerretche, Oscar & Schmidt-Hebbel, Klaus, 2001. "Assessing Inflation Targeting after a Decade of World Experience," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 6(4), pages 343-68, October.
    11. Ben S. Bernanke & Frederic S. Mishkin, 1997. "Inflation Targeting: A New Framework for Monetary Policy?," Journal of Economic Perspectives, American Economic Association, vol. 11(2), pages 97-116, Spring.
    12. Frederic Mishkin & Klaus Schmidt-Hebbel, 2002. "A Decade of Inflation Targeting in the World: What Do We Know and What Do We Need to Know?," Central Banking, Analysis, and Economic Policies Book Series, in: Norman Loayza & Raimundo Soto & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel (Series Editor) (ed.), Inflation Targeting: Desing, Performance, Challenges, edition 1, volume 5, chapter 4, pages 171-220 Central Bank of Chile.
    13. Rafael Lalive & JanC. vanOurs & Josef Zweimüller, 2008. "The Impact of Active Labour Market Programmes on The Duration of Unemployment in Switzerland," Economic Journal, Royal Economic Society, vol. 118(525), pages 235-257, 01.
    14. Marvin Goodfriend, 2003. "Inflation Targeting in the United States?," NBER Working Papers 9981, National Bureau of Economic Research, Inc.
    15. Grubb, David B. & Jackman, Richard & Layard, Richard, 1983. "Wage rigidity and unemployment in OECD countries," European Economic Review, Elsevier, vol. 21(1-2), pages 11-39.
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