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Exchange Rates and Prices: Evidence from the 2015 Swiss Franc Appreciation

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  • Auer, Raphael
  • Burstein, Ariel Tomas
  • Lein, Sarah

Abstract

We dissect the impact of a large and sudden exchange rate appreciation on Swiss border import prices, retail prices, and consumer expenditures on domestic and imported non-durable goods, following the removal of the EUR/CHF floor in January 2015. Cross-sectional variation in border price changes by currency of invoicing carries over to consumer prices and allocations, impacting retail prices of imports and competing domestic goods, as well as import expenditures. We provide measures of the sensitivity of retail import prices to border prices and the sensitivity of import shares to relative prices, which is higher when using retail prices than border prices.

Suggested Citation

  • Auer, Raphael & Burstein, Ariel Tomas & Lein, Sarah, 2020. "Exchange Rates and Prices: Evidence from the 2015 Swiss Franc Appreciation," CEPR Discussion Papers 15397, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:15397
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    Cited by:

    1. Holger Breinlich & Elsa Leromain & Dennis Novy & Thomas Sampson, 2019. "Exchange Rates and Consumer Prices: Evidence from Brexit," CESifo Working Paper Series 8001, CESifo.
    2. Xavier Jaravel & Erick Sager, 2019. "What are the price effects of trade? Evidence from the US and implications for quantitative trade models," CEP Discussion Papers dp1642, Centre for Economic Performance, LSE.
    3. Chen, Natalie & Chung, Wanyu & Novy, Dennis, 2018. "Vehicle Currency Pricing and Exchange Rate Pass-Through," CEPR Discussion Papers 13085, C.E.P.R. Discussion Papers.
    4. Costa, Rui & Dhingra, Swati & Machin, Stephen, 2019. "Trade and Worker Deskilling," CEPR Discussion Papers 13768, C.E.P.R. Discussion Papers.
    5. Rahel Braun & Sarah M. Lein, 2021. "Sources of Bias in Inflation Rates and Implications for Inflation Dynamics," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 53(6), pages 1553-1572, September.
    6. Raphael Auer & Ariel Burstein & Katharina Erhardt & Sarah M. Lein, 2019. "Exports and Invoicing: Evidence from the 2015 Swiss Franc Appreciation," AEA Papers and Proceedings, American Economic Association, vol. 109, pages 533-538, May.
    7. Kazuko Kano & Takashi Kano, 2021. "Welfare Costs of Exchange Rate Fluctuations: Evidence from the 1972 Okinawa Reversion," CIRJE F-Series CIRJE-F-1179, CIRJE, Faculty of Economics, University of Tokyo.
    8. Santiago E. Alvarez & Sarah M. Lein, 2020. "Tracking inflation on a daily basis," Swiss Journal of Economics and Statistics, Springer;Swiss Society of Economics and Statistics, vol. 156(1), pages 1-13, December.
    9. Fischer, Andreas M & Yesin, Pinar, 2019. "Foreign currency loan conversions and currency mismatches," CEPR Discussion Papers 13923, C.E.P.R. Discussion Papers.
    10. Konstantin Egorov & Dmitry Mukhin, 2020. "Optimal Policy under Dollar Pricing," Working Papers w0261, New Economic School (NES).
    11. Mary Amiti & Oleg Itskhoki & Jozef Konings, 2018. "Dominant currencies How firms choose currency invoicing and why it matters," Working Paper Research 353, National Bank of Belgium.
    12. Giuliano, Fernando & Luttini, Emiliano, 2020. "Import prices and invoice currency: Evidence from Chile," Journal of International Money and Finance, Elsevier, vol. 106(C).
    13. Fernandes, Ana & Winters, L. Alan, 2018. "The effect of exchange rate shocks on firm-level exports: evidence from the Brexit vote," CEPR Discussion Papers 13253, C.E.P.R. Discussion Papers.
    14. Fernandes, Ana P. & Winters, L. Alan, 2021. "Exporters and shocks: The impact of the Brexit vote shock on bilateral exports to the UK," Journal of International Economics, Elsevier, vol. 131(C).
    15. Jaravel, Xavier & Sager, Erick, 2019. "What are the price effects of trade? Evidence from the US for quantitative trade models," LSE Research Online Documents on Economics 103402, London School of Economics and Political Science, LSE Library.

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    More about this item

    Keywords

    exchange rate pass-through; Expenditure Switching; invoicing currency; large exchange rate shock; nominal rigidities; Optimal price-setting;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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