Template-type: ReDIF-Paper 1.0
Author-Name: Dr. Petra Gerlach
Author-Name-First: Petra
Author-Name-Last: Gerlach
Author-Person: pge202
Title: A Two-Pillar Phillips Curve for Switzerland
Abstract: Historically, money growth has played an important role in Swiss monetary policy, until 1999 as a target and from 2000 onwards as an indicator variable. Since the new policy framework focusses on an inflation forecast, the question arises how useful money growth is for predicting future price developments. Using Swiss data, this paper estimates a model first proposed by Gerlach (2004) for the euro area that integrates money growth in an inflation forecasting equation. This "two-pillar" Phillips curve suggests that the low-frequency component of money growth, alongside current inflation and the output gap, helps predict future inflation. These results are confirmed by an alternative money-augmented Phillips curve proposed by Neumann (2003).
Length: 41 pages
Creation-Date: 2006
Contact-Email: forschung@snb.ch
File-URL: https://www.snb.ch/en/publications/research/working-papers/2006/working_paper_2006_09
File-Format: text/html
Number: 2006-09
Classification-JEL: E31, E42, E5
Keywords: Inflation, money, Phillips curve, Switzerland
Handle: RePEc:snb:snbwpa:2006-09