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Is there a Swiss price puzzle?


This paper estimates the response of consumer prices to a monetary policy shock in Switzerland. We find that there is no evidence of a price puzzle at the aggregate level. This is because our factor-augmented vector autoregression (FAVAR) avoids misspecification by including more information than a traditional VAR. However, the response is still delayed by at least four quarters, partly because there is a price puzzle in some sectors. In particular, rents tend to rise after a monetary policy tightening because there are legal provisions in Switzerland which link them to interest rates. But durable goods prices also rise, which is consistent with the existence of a cost channel of monetary policy.


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Corresponding author

Correspondence to Daniel Kaufmann.

Additional information

We thank Gregor Bäurle, Sandra Eickmeier, Marc Giannoni, Sylvia Kaufmann, Carlos Lenz, Matthias Lutz, Klaus Neusser, Barbara Rudolf, Frank Schmid, Peter Tillmann, Mathias Zurlinden, two anonymous referees, participants of the YSEM meeting, the SSES annual meeting, the BuBa-OeNB-SNB workshop and the SNB Brown Bag workshop for helpful discussions and suggestions. An earlier version was published as SNB Working Paper 2011–7 titled “Sectoral Inflation Dynamics, Idiosyncratic Shocks and Monetary Policy”. Andreas Bachmann and Andrea Schnell provided excellent research assistance. The views expressed in this paper are those of the authors and not necessarily those of the Swiss National Bank.

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Kaufmann, D., Lein, S. Is there a Swiss price puzzle?. Swiss J Economics Statistics 148, 57–75 (2012).

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  • E31
  • E4
  • E5
  • C38


  • monetary policy transmission
  • price puzzle
  • cost channel