Skip to main content
Swiss Journal of Economics and Statistics
Download PDF

Unemployment and monetary policy in Switzerland

Swiss Journal of Economics and Statistics volume 146, pages 185–208 (2010)Cite this article

Summary

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.

References

  • Ammer, J. and R. Freeman (1995), “Inflation Targeting in the 1990’s: The Experiences of New Zealand, Canada, and the United Kingdom”, Journal of Economics and Business, 47, pp. 165–192.

    Article  Google Scholar 

  • Ball, L. (1994), “What Determines the Sacrifice Ratio?”, in: N. Mankiw (ed.), Monetary Policy, Chicago: University of Chicago Press, pp. 155–182.

    Google Scholar 

  • Ball, L. and N. Sheridan (2005), “Does Inflation Targeting Make a Difference?”, in: M. Woodford and B. Bernanke (eds), Inflation Targeting, Chicago: University of Chicago Press, pp. 249–76.

    Google Scholar 

  • Benati, L. (2003), “Evolving Post-World War II U.K. Economic Performance”, Journal of Money, Credit, and Banking, 36(4).

  • Bernanke, B., T. Laubach, F. Mishkin, and A. Posen (1999), Inflation Targeting: Lessons from the International Experience, Princeton, NJ: Princeton University Press.

    Google Scholar 

  • Bernanke, B., and F. Mishkin (1997), “Inflation Targeting: A New Framework for Monetary Policy?”, Journal of Economic Perspectives, 11, pp. 97–116.

    Article  Google Scholar 

  • Coe, D. (1985), “Nominal Wages, the NAIRU and Wage Flexibility”, OECD Economic Studies, No. 5, pp. 87–126.

  • Corbo, V., O. Landerretche, and K. Schmidt-Hebbel (2001), “Assessing Inflation Targeting after a Decade of World Experience”, International Journal of Finance & Economics 6(4), pp. 343–368.

    Article  Google Scholar 

  • Dickens, W. (2008), “A New Method to Estimate Time Variation in the NAIRU”, Paper prepared for the Federal Reserve Bank of Boston’s Conference “Understanding Inflation and the Implications for Monetary Policy, A Phillips Curve Retrospective”, Northwestern University and Brookings Institution.

  • Epstein, G. (2007), “Central Banks, Inflation Targeting and Employment Creation”, Economic and Labour Market Papers 2007/2, Employment Analysis and Research Unit, Economic and Labour Market Analysis Department, International Labour Office, Geneva.

  • Freeman, R., and J. Willis (1995), “Targeting Inflation in the 1990s: Recent Challenges”, Federal Reserve Board International Finance Discussion Paper No. 525.

  • Gerfin, M, and M. Lechner (2002). “A Microeconometric Evaluation of the Active Labour Policy in Switzerland”, Economic Journal, 112, pp. 854–893.

    Article  Google Scholar 

  • Goodfriend, M. (2003), “Inflation Targeting in the United States?” in: M. Woodford and B. Bernanke (eds), Inflation Targeting, Chicago: University of Chicago Press, pp. 311–352.

    Chapter  Google Scholar 

  • Grubb, D., R. Jackman, and R. Layard (1983), “Wage Rigidity and Unemployment in OECD Countries”, European Economic Review, 21(1–2), pp. 11–39.

    Article  Google Scholar 

  • Gürkaynak, R., A. Levin, and E. Swanson (2006), “Does Inflation Targeting Anchor Long-Run Inflation Expectations? Evidence from Long-Term Bond Yields in the U.S., U.K., and Sweden”, Working Paper No. 2006-09, Federal Reserve Bank of San Francisco.

  • Huh, C. (1996), Some Evidence on the Efficacy of the UK Inflation Targeting regime: An Out-of-Sample Forecast Approach”, Federal Reserve Board International Finance Discussion Paper No. 565.

  • Kuttner, K., and A. Posen (1999), “Does Talk Matter After All? Inflation Targeting and Central Bank Behavior”, Federal Reserve Bank of New York Staff Report No. 88.

  • Lalive, R., van Ours, J., and J. Zweimüller (2008), “The Impact of Active Labour Market Programmes on The Duration of Unemployment in Switzerland”, Economic Journal, 118, pp. 235–257.

    Article  Google Scholar 

  • Laubach, T., and A. Posen (1997), “Some Comparative Evidence on the Effectiveness of Inflation Targeting”, Federal Reserve Bank of New York Research Paper No. 9714, New York.

  • Layard, R., and S. Nickell (1986), “Unemployment in Britain”, Economica, Supplement, 53, pp. S121–S170.

    Article  Google Scholar 

  • Layard, R., S. Nickell, and R. Jackman (1991), Unemployment: Macroeconomic Performance and the Labour Market, Oxford: Oxford University Press.

    Google Scholar 

  • Leiderman, L., and L. Svensson, L. (eds) (1995), Inflation Targets. London: Centre for Economic Policy Research.

    Google Scholar 

  • Levin, A., F. Natalucci, and J. Piger (2004), “Explicit Inflation Objectives and Macroeconomic Outcomes”, European Central Bank Working Paper No. 383, Frankfurt: ECB.

  • Mishkin, F., and K. Schmidt-Hebbel (2002), “One Decade of Inflation Targeting in the World: What Do We Know and What Do We Need to Know?” in: N. Loayza, R. Soto (eds), A Decade of Inflation Targeting in the World, Santiago: Central Bank of Chile, pp. 117–219.

    Google Scholar 

  • Neumann, M., and J. von Hagen (2002), „Does Inflation Targeting Matter?”, Federal Reserve Bank of St. Louis Review, 84, pp. 127–148.

    Google Scholar 

  • Pétursson, T. (2004), “The Effects of Inflation Targeting on Macroeconomic Performance”, Central Bank of Iceland Working Papers No. 23, Reykjavík: Central Bank of Iceland.

  • Richardson, P., L. Boone, C. Giorno, M. Meacci, D. Rae, and D. 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, No. 250, Paris: OECD.

  • Schaechter, A., M. Stone, and M. Zelmer (2000), “Adopting Inflation Targeting: Practical Issues for Emerging Market Countries”, IMF Occasional Paper No. 202.

  • Sheldon, G. (1997), “Unemployment and Unemployment Insurance in Switzerland”, in: P. Bacchetta and W. Wasserfallen (eds), Economic Policy in Switzerland, London: Macmillan, pp. 62–92.

    Chapter  Google Scholar 

  • Sheldon, G. (1999), „Arbeitsmarkt, Arbeitslosenversicherung“, in: Kommission für Konjunkturfragen (ed.), Liberales wirtschaftspolitisches Konzept. Materialband, Bern, pp. 1–32.

  • Sheldon, G. (2005), Der berufsstrukturelle Wandel der Beschäftigung in der Schweiz 1970–2000: Ausmass, Ursachen und Folgen, Bundesamt für Statistik: Neuchâtel.

  • Sheldon, G. (2008), „Performance der öffentlichen Arbeitsvermittlung der Schweiz im Zeitraum 1998–2007“, Die Volkswirtschaft, 81(11), pp. 52–54.

    Google Scholar 

  • Siklos, P. (1999), “Inflation-Target Design: Changing Inflation Performance and Persistence in Industrial Countries”, Federal Reserve Bank of St. Louis Review March 1999, pp. 46–58.

  • Staiger, D., J. Stock, and M. Watson (1997), “How Precise are Estimates of the Natural Rate of Unemployment?”, in: C. Romer and D. Romer (eds), Reducing Inflation: Motivation and Strategy. Chicago: University of Chicago Press, pp. 195–246.

    Google Scholar 

  • Staiger, D., J. Stock, and M. Watson (2001), “Prices, Wages, and the U.S. NAIRU in the 1990s”, in: A. B. Krueger and R. Solow (eds), The Roaring Nineties: Can Full Employment be Sustained?, New York: The Russell Sage Foundation and the Century Foundation Press, pp. 3–60.

    Google Scholar 

  • Svensson, L. (1993), “The Simplest Test of Target Credibility”, NBER Working Paper No. 4604.

  • Svensson, L., M. Woodford (2005), “Implementing Optimal Policy through Inflation-Forecast Targeting”, in: B. Bernanke and M. Woodford (eds), Inflation Targeting, Chicago: University of Chicago Press.

    Google Scholar 

  • Vinent, J. (2004), Essays on Production and Business Cycles, Dissertation Nr. 560, University of Geneva.

  • Zanetti, A. (1998), „Strukturelle Arbeitslosigkeit und Inflation“, Swiss National Bank Quarterly Bulletin, 16(2), pp. 45–56.

    Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Department of Economics, FAI, University of Basel, Peter Merian-Weg 6, 4653, CH-4002, Basel, Switzerland

    Peter Kugler & George Sheldon

Authors
  1. Peter Kugler
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. George Sheldon
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Peter Kugler.

Rights and permissions

Open Access This article is distributed under the terms of the Creative Commons Attribution 2.0 International License ( https://creativecommons.org/licenses/by/2.0 ), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

Reprints and Permissions

About this article

Cite this article

Kugler, P., Sheldon, G. Unemployment and monetary policy in Switzerland. Swiss J Economics Statistics 146, 185–208 (2010). https://doi.org/10.1007/BF03399301

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/BF03399301

JEL-Classification

  • E24
  • E31
  • E50

Keywords

  • inflation targeting
  • NAIRU
  • Phillips curve