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CHF strength and Swiss export performance -- evidence and outlook from a disaggregate analysis

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  • Raphael Auer
  • Philip Saur�

Abstract

Why has Swiss export performance been so strong during the past quarters despite the marked appreciation of the Swiss Franc (CHF)? What is the outlook for Swiss exports given the still elevated CHF? In this article, we shed light on these questions by analysing a panel of Swiss exports disaggregated along both the regional and the industry dimension. To explain the export performance of the recent past, we estimate how the exchange rate and demand growth in each export market affect trade flows and also, how this varies across different industries. The appreciation of the CHF has considerably dampened Swiss export performance. As a counterfactual, we ask how Swiss exports would have developed had the CHF stayed flat against other currencies during the 5 years leading up to October 2010. Compared to this scenario, the Swiss export industry has already lost a cumulative of CHF 35 billion in revenues due to the CHF appreciation. At the current juncture, monthly exports are reduced by CHF 2.7 billion (around 17%). We show that the key reason for the strong export performance despite the CHF strength was the rebound in global demand in the aftermath of the financial crisis. Moreover, we also document that the timing of global demand growth has completely masked the effect of the CHF strength: during the last quarters, periods of pronounced CHF appreciation always coincided with strong recovery of global demand. Failure to account for this coincidence could lead to the wrong assumption that the exchange rate matters very little for Swiss export performance. Last, to gauge the likely evolution of Swiss exports and their regional composition in the years to come, we combine our estimation results with the regional Gross Domestic Product (GDP) and exchange rate forecasts provided by the Swiss National Bank (SNB). Following this approach, we predict that over the next 3 years, Swiss exports will rise a combined 16%, with little less than half of this increase going to Emerging Asia and 30% to the euro zone. We also document the key industries that will drive Swiss export growth in the near future.

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  • Raphael Auer & Philip Saur�, 2012. "CHF strength and Swiss export performance -- evidence and outlook from a disaggregate analysis," Applied Economics Letters, Taylor & Francis Journals, vol. 19(6), pages 521-531, April.
    • Handle: RePEc:taf:apeclt:v:19:y:2012:i:6:p:521-531
    DOI: 10.1080/13504851.2011.587761
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    1. Christian Broda & David E. Weinstein, 2006. "Globalization and the Gains From Variety," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(2), pages 541-585.
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    4. Raphael Auer & Philip Saure, 2011. "Industry Composition and the Effects of Exchange Rates on Exports - Why Switzerland is Special:," Aussenwirtschaft, University of St. Gallen, School of Economics and Political Science, Swiss Institute for International Economics and Applied Economics Research, vol. 66(03), pages 323-338, September.
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    Cited by:

    1. Buchholz, Manuel & von Schweinitz, Gregor & Tonzer, Lena, 2018. "Did the Swiss exchange rate shock shock the market?," IWH Discussion Papers 9/2018, Halle Institute for Economic Research (IWH).
    2. Sandra Hanslin Grossmann & Sarah M. Lein & Caroline Schmidt, 2016. "Exchange rate and foreign GDP elasticities of Swiss exports across sectors and destination countries," Applied Economics, Taylor & Francis Journals, vol. 48(57), pages 5546-5562, December.
    3. Alberto Behar & Armand Fouejieu, 2018. "External adjustment in oil exporters: The role of fiscal policy and the exchange rate," The World Economy, Wiley Blackwell, vol. 41(3), pages 926-957, March.
    4. Dario Fauceglia & Andrea Lassmann & Anirudh Shingal & Martin Wermelinger, 2018. "Backward participation in global value chains and exchange rate driven adjustments of Swiss exports," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 154(3), pages 537-584, August.
    5. Raphael Auer & Philip Saure, 2011. "Export basket and the effects of exchange rates on exports–why Switzerland is special," Globalization Institute Working Papers 77, Federal Reserve Bank of Dallas.
    6. THORBECKE, Willem & KATO Atsuyuki, 2014. "Export Sophistication and Exchange Rate Elasticities: The Case of Switzerland," Discussion papers 14031, Research Institute of Economy, Trade and Industry (RIETI).
    7. Marlene Amstad & Beatrice Weder di Mauro, 2017. "Long-run effects of exchange rate appreciation: Another puzzle?," Aussenwirtschaft, University of St. Gallen, School of Economics and Political Science, Swiss Institute for International Economics and Applied Economics Research, vol. 68(01), pages 63-82, December.
    8. Matthias Flückiger & Christian Rutzer & Rolf Weder, 2016. "Die Schweizer Wirtschaft zwischen Hammer und Amboss: Eine Analyse der "Franken-Schocks" 2010/11 und 2015," Aussenwirtschaft, University of St. Gallen, School of Economics and Political Science, Swiss Institute for International Economics and Applied Economics Research, vol. 67(03), pages 95-133, December.
    9. Johannes Eugster & Giovanni Donato, 2022. "The exchange rate elasticity of the Swiss current account," Working Papers 2022-14, Swiss National Bank.
    10. Twinam, Tate, 2020. "Trade Shocks and Growth: The Impact of the Quartz Crisis in Switzerland," SocArXiv twscm, Center for Open Science.
    11. Thorbecke, Willem & Kato, Atsuyuki, 2018. "Exchange rates and the Swiss economy," Journal of Policy Modeling, Elsevier, vol. 40(6), pages 1182-1199.
    12. Dario Fauceglia, 2020. "Exchange rate fluctuations and quality composition of exports: Evidence from Swiss product‐level data," The World Economy, Wiley Blackwell, vol. 43(6), pages 1592-1618, June.
    13. Peter H. Egger & Johannes Schwarzer & Anirudh Shingal, 2018. "Labour market effects of currency appreciation: The case of Switzerland," RSCAS Working Papers 2018/30, European University Institute.

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