Is There a Swiss Price Puzzle?

Daniel Kaufmann and Sarah Lein

Swiss Journal of Economics and Statistics (SJES), 2012, vol. 148, issue I, 57-75

Abstract: 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.

Keywords: monetary policy transmission; price puzzle; cost channel; factor-augmented VAR (search for similar items in EconPapers)
JEL-codes: C38 E31 E4 E5 (search for similar items in EconPapers)
Date: 2012
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:ses:arsjes:2012-i-3

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