Summary In light of the strong increase of house prices in Switzerland in the 2000s and early 2010s, we analyze the effects of mortgage rate shocks, changes in housing demand & supply and business cycle conditions on house prices for the time period 1982–2013. We study intertemporal effects by employing Bayesian timevarying coefficients vector autoregressions (TVC-BVAR), regional effects by using regional BVARs and heterogeneity in housing markets by looking at housing segments. 50 % of house price variations can be explained by housing demand & supply. The response of house prices to mortgage rate shocks weakened after the 1990s real estate crisis and remained constant thereafter. However, owneroccupied apartment prices became again more sensitive to mortgage rate shocks during the recent house price boom. Regional effects are especially prevalent for regions Zurich and Geneva.

This paper provides novel evidence on downward nominal wage rigidities and their allocative effects in Switzerland. We match individual wages from a bi-annual firm survey with information on annual income and employment from social security register data. We find relevant downward nominal wage rigidities in the base wage, which accounts for more than 90% of employment income. We then identify the allocative effects of downward nominal wage rigidities on income and employment after an unexpected 1% decline of the consumer price level. Base wage rigidities cause a decline of aggregate income (-0.39%) and employment income (-0.97%), as well as an increase of unemployment (2.11%).

We measure the labor market outcomes of employees with downward rigid base wages after an unexpected deflationary shock in Switzerland using a firm survey matched with Social Security register data. The employees that additionally receive downward flexible compensation, such as bonuses, are less likely to lose their job after a deflationary shock than those only receiving a base wage. Only a modest share of employees receives downward flexible compensation, however. Therefore, these compensation schemes do not offset the overall allocative effects of downward rigid base wages.