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  • Open Access

How to Explain the High Prices in Switzerland?

Swiss Journal of Economics and Statistics2009145:BF03399292

https://doi.org/10.1007/BF03399292

  • Published:

Summary

This article challenges the view that a lack of competition and a high level of regulations are the main causes of Switzerland’s high prices. First, we point out a number of stylized facts which are inconsistent with this popular view. Second, we econometrically asses the “competition-regulation hypothesis” together with the well-established determinants from the real exchange rate literature in a panel of 22 OECD countries from 1970 to 2004. We find that changes in the terms of trade and the degree of openness, and to a minor extent in government expenditures and the current account, explain the movements in the Swiss real exchange rate reasonably well over the last 35 years. Changes in regulations and competition as well as in relative productivities perform poorly as explanatory variables.

JEL-Classification

  • F14
  • N74

Keywords

  • real exchange rate
  • terms of trade
  • Balassa-Samuelson
  • regulations
  • Switzerland

Notes

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