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International Monetary Fund
This Selected Issues paper and Statistical Appendix evaluates Switzerland’s long-term growth and productivity performance. It analyzes the behavior of Swiss fiscal policy over the business cycle and takes a fresh look at the nature of the tradeoff between inflation and economic activity in Switzerland. The paper reports estimates of the automatic and discretionary responses of general government finances to cyclical output movements during 1970–96. It also examines the main options for improving the stabilization role of Switzerland’s fiscal policy over the business cycle.
International Monetary Fund
This Selected Issues paper and Statistical Appendix assesses Switzerland’s recent real GDP performance in terms of underlying movements in potential output and the cyclical output gap. The paper highlights that Swiss real GDP has been stagnant since 1990, after expanding at an average rate of some 1¾ percent during 1977–90. The evidence presented indicates that potential output growth during 1991–95 was significantly below historical average. This paper also tries to assess the possible effects of stage 3 of European Monetary Union on Switzerland.
International Monetary Fund
This Selected Issues paper and Statistical Appendix compares two alternative time series approaches to analyzing Switzerland’s recent business cycle experience: first, the traditional “smooth-trend-plus-cycle approach,” which envisages observed output growth as fluctuating around a relatively smooth potential output growth path; and, second, the more recently developed “regime change approach,” which views business cycles as shifts between “high-growth” states (expansions) and “slow-growth” states (recessions) of the economy. The paper also examines Switzerland’s monetary policy framework, and describes the challenges to the Swiss tax system.
Laurence M. Ball, Mr. Daniel Leigh, and Mr. Prakash Loungani
This paper asks how well Okun’s Law fits short-run unemployment movements in the United States since 1948 and in twenty advanced economies since 1980. We find that Okun’s Law isa strong and stable relationship in most countries, one that did not change substantiallyduring the Great Recession. Accounts of breakdowns in the Law, such as the emergence of“jobless recoveries,” are flawed. We also find that the coefficient in the relationship—the effect of a one percent change in output on the unemployment rate—varies substantially across countries. This variation is partly explained by idiosyncratic features of national labormarkets, but it is not related to differences in employment protection legislation.
International Monetary Fund. External Relations Dept.

Many economists strongly advocate inflation targeting as a framework for conducting monetary policy. Under this approach, first adopted by New Zealand in 1989, countries make an explicit commitment to meet a specified inflation rate target or target range within a certain time frame. Proponents of inflation targeting cite its many potential benefits—it can lower average inflation, stabilize output, and lock in expectations of low inflation, which can reduce the inflationary impact of macroeconomic shocks. But is there hard evidence yet that inflation targeting really has helped improve inflation, output, and interest rate performance? A study by Laurence Ball (Professor of Economics, Johns Hopkins University) and Niamh Sheridan (Economist, IMF Institute) argues that the early evidence is inconclusive. They suggest greater experience may be needed before a definitive answer can be reached.

International Monetary Fund

This Selected Issues paper and Statistical Appendix assesses Switzerland’s recent real GDP performance in terms of underlying movements in potential output and the cyclical output gap. The paper highlights that Swiss real GDP has been stagnant since 1990, after expanding at an average rate of some 1¾ percent during 1977–90. The evidence presented indicates that potential output growth during 1991–95 was significantly below historical average. This paper also tries to assess the possible effects of stage 3 of European Monetary Union on Switzerland.

International Monetary Fund

This Selected Issues paper and Statistical Appendix compares two alternative time series approaches to analyzing Switzerland’s recent business cycle experience: first, the traditional “smooth-trend-plus-cycle approach,” which envisages observed output growth as fluctuating around a relatively smooth potential output growth path; and, second, the more recently developed “regime change approach,” which views business cycles as shifts between “high-growth” states (expansions) and “slow-growth” states (recessions) of the economy. The paper also examines Switzerland’s monetary policy framework, and describes the challenges to the Swiss tax system.

International Monetary Fund

This Selected Issues paper attempts to quantify the impact of the demographic shift on growth and public finances in Switzerland. It examines the intertemporal consistency between current policy plans and unfunded liabilities, focusing primarily on social security, and explores policy options. It finds that so far, the impact of aging on the economy has been moderate. The number of pensioners has risen in recent years, but this is mainly owing to early retirees taking advantage of the generous disability and pension systems. The paper also examines the need for health care reforms in Switzerland.

International Monetary Fund

In Switzerland, institutionalized expenditure restraints via budget rules have been in use for some time at the cantonal level and for various city budgets. Under the proposed rule for the federal government, spending limits are set by the government although the parliament is primarily allowed to make only compositional changes in expenditure. Level changes require a qualified majority in parliament. With these requirements, the Swiss government aims to shift the political debate away from spending ceilings toward a debate about long-term spending trends.

International Monetary Fund

This Selected Issues paper and Statistical Appendix evaluates Switzerland’s long-term growth and productivity performance. It analyzes the behavior of Swiss fiscal policy over the business cycle and takes a fresh look at the nature of the tradeoff between inflation and economic activity in Switzerland. The paper reports estimates of the automatic and discretionary responses of general government finances to cyclical output movements during 1970–96. It also examines the main options for improving the stabilization role of Switzerland’s fiscal policy over the business cycle.