Wage-price pass-through in Switzerland

Jessica Leutert, Rolf Scheufele and Selina Schön

No 2025-06, Working Papers from Swiss National Bank

Abstract: We analyse the historical relationship between consumer prices and wages in Switzerland. Our results show that, between 1980 and 2019, the pass-through from prices to wages was substantial. At the same time, nominal wage increases only had a modest effect on prices. Other factors – such as imported inflation, inflation expectations and economic slack – clearly dominate wages in explaining price movements in Switzerland. Second-round effects of inflation, in turn, are mainly explained by inflation expectations. Our results suggest that the pass-through from wages to prices could be higher in an environment of elevated inflation. However, even in the 1980s and 1990s, the pass-through was only modest. It follows that periods of simultaneously high inflation and high wage growth were not the result of a wage-price spiral. Instead, the long-term comovement of the two variables can mostly be explained by common drivers (e.g., inflation expectations, economic slack) and by the gradual adjustment of wages to price.

Keywords: Inflation; Labour costs; Pass-through; Switzerland; SVECM; Granger causality (search for similar items in EconPapers)
JEL-codes: E24 E31 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2025
New Economics Papers: this item is included in nep-his and nep-mon
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