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A Two-Pillar Phillips Curve for Switzerland

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  • Petra Gerlach-Kristen

Abstract

Historically, money growth has played an important role in Swiss monetary policy, until 1999 as a target and from 2000 onwards as an indicator variable. Since the new policy framework focusses on an inflation forecast, the question arises how useful money growth is for predicting future price developments. Using Swiss data, this paper estimates a model first proposed by Gerlach (2004) for the euro area that integrates money growth in an inflation forecasting equation. This "two-pillar" Phillips curve suggests that the low-frequency component of money growth, alongside current inflation and the output gap, helps predict future inflation. These results are confirmed by an alternative money-augmented Phillips curve proposed by Neumann (2003).

Suggested Citation

  • Petra Gerlach-Kristen, 2006. "A Two-Pillar Phillips Curve for Switzerland," Working Papers 2006-09, Swiss National Bank.
  • Handle: RePEc:snb:snbwpa:2006-09
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    References listed on IDEAS

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    1. Assenmacher-Wesche, Katrin & Gerlach, Stefan, 2008. "Money growth, output gaps and inflation at low and high frequency: Spectral estimates for Switzerland," Journal of Economic Dynamics and Control, Elsevier, vol. 32(2), pages 411-435, February.
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    3. Gerlach, Stefan, 2003. "The ECB's Two Pillars," CEPR Discussion Papers 3689, C.E.P.R. Discussion Papers.
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    7. Petra Gerlach-Kristen, 2007. "A Two-Pillar Phillips Curve for Switzerland," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 143(IV), pages 425-448, December.
    8. Gali, Jordi & Gertler, Mark & Lopez-Salido, J. David, 2001. "European inflation dynamics," European Economic Review, Elsevier, vol. 45(7), pages 1237-1270.
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    11. Katrin Assenmacher-Wesche & M. Hashem Pesaran, 2008. "A VECX Model of the Swiss Economy," CESifo Working Paper Series 2281, CESifo.
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    Cited by:

    1. Oleg KITOV & Ivan KITOV, 2012. "Inflation And Unemployment In Switzerland: From 1970 To 2050," Journal of Applied Economic Sciences, Spiru Haret University, Faculty of Financial Management and Accounting Craiova, vol. 7(2(20)/ Su), pages 141-156.
    2. Aaron Mehrotra & Tomáš Slacík, 2009. "Evaluating Inflation Determinants with a Money Supply Rule in Four Central and Eastern European EU Member States," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 3, pages 6-21.
    3. Petra Gerlach-Kristen, 2007. "A Two-Pillar Phillips Curve for Switzerland," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 143(IV), pages 425-448, December.
    4. Aleksejs Melihovs & Anna Zasova, 2007. "Estimation of the Phillips Curve for Latvia," Working Papers 2007/03, Latvijas Banka.
    5. Peter Kugler & Samuel Reynard, 2020. "Money, inflation and the financial crisis: the case of Switzerland," Working Papers 2020-16, Swiss National Bank.

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    More about this item

    Keywords

    inflation; money; Phillips curve; Switzerland;
    All these keywords.

    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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