Applying The Hirose-Kamada Filter To Swiss Data: Output Gap And Exchange Rate Pass-Through Estimates
Source: Swiss National Bank
Multivariate filters based on the Hodrick-Prescott filter are appealing because they combine the advantages of the Hodrick-Prescott filter with economic relationships. Recently, a new multivariate filter has been put forward by Hirose and Kamada (2003). In this paper the authors apply this new filter to Swiss data spanning the period from 1981 to 2005. The estimate both potential output and the associated output gap with quarterly data. Moreover, a model-consistent Phillips curve for an open economy is derived from simple economic relationships. Based on the estimated Phillips curve, they investigate exchange-rate pass through effects on consumer prices. They find only a weak transmission of exchange rate fluctuations into consumer prices.