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A Two-Pillar Phillips Curve for Switzerland


Monetary aggregates have historically been important in Swiss monetary policy. The Swiss National Bank used money growth targets until 1999. The new policy framework introduced in 2000 focuses on an inflation forecast that relies on money growth as an indicator. How useful is money growth for explaining inflation in Switzerland? Using data spanning 1979 to 2007, we estimate a Phillips curve model that incorporates a measure of “trend” money growth and find that it impacts on inflation if one takes the downward shift in nominal interest rates over the sample into account. Including money growth reduces the in-sample forecasting errors by 15%.


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Correspondence to Petra Gerlach-Kristen.

Additional information

The views expressed in this paper are the author’s and do not necessarily reflect those of the Swiss National Bank. I thank the anonymous referee, Katrin Assenmacher-Wesche, Andreas Fischer, Stefan Gerlach, Michel Peytrignet, Samuel Reynard, Marcel Savioz, Peter Stalder, Andreas Worms and seminar participants at the 2006 meeting of the Swiss Society of Economics and Statistics in Lugano, at the Bundesbank-OeNB-SNB workshop 2006 in Eltville and at the SNB for helpful comments.

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Gerlach-Kristen, P. A Two-Pillar Phillips Curve for Switzerland. Swiss J Economics Statistics 143, 425–448 (2007).

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  • inflation
  • money growth
  • Phillips curve
  • Switzerland


  • E31
  • E42
  • E5