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A neoclassical perspective on Switzerland's 1990s stagnation

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  • Yannic Stucki
  • Jacqueline Thomet

Abstract

We study Switzerland's weak growth during the 1990s through the lens of the business cycle accounting framework of Chari, Kehoe, and McGrattan (2007). Our main result is that weak productivity growth cannot account for the stagnation experienced during that time. Rather, the stagnation is explained by factors that made labour and investment expensive. We show that increased labour income taxes and financial frictions are plausible causes. Holding these factors constant, the counterfactual annualized real output growth over the 1992Q2-1996Q4 period is 1.93% compared to realized growth of 0.35%.

Suggested Citation

  • Yannic Stucki & Jacqueline Thomet, 2020. "A neoclassical perspective on Switzerland's 1990s stagnation," Working Papers 2020-22, Swiss National Bank.
  • Handle: RePEc:snb:snbwpa:2020-22
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    More about this item

    Keywords

    Business cycle accounting; housing crises; stagnation; Switzerland;
    All these keywords.

    JEL classification:

    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes

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