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The speed of exchange rate pass-through

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  • Bonadio, Barthélémy

    (University of Michigan)

  • Fischer, Andreas M.

    () (Swiss National Bank and CEPR)

  • Saure, Philip

    () (Swiss National Bank)

Abstract

On January 15, 2015, the Swiss National Bank terminated its minimum exchange rate policy of one euro against 1.2 Swiss francs. This policy shift resulted in a sharp, unanticipated and permanent appreciation of the Swiss franc by more than 11% against the euro. We analyze the exchange rate pass-through into import unit values of this shock at the daily frequency using Swiss transaction-level trade data. Our key findings are twofold. First, for goods invoiced in euro the pass-through is immediate and complete. This finding is consistent with no systematic nominal price adjustment in this subset of goods. Second, for goods invoiced in Swiss francs the pass-through is partial and very fast: it starts on the second working day after the exchange rate shock and reaches the medium-run pass-through after eight working days on average. We interpret the latter finding as evidence that nominal rigidities unravelled quickly in the face of a large exchange rate shock.

Suggested Citation

  • Bonadio, Barthélémy & Fischer, Andreas M. & Saure, Philip, 2016. "The speed of exchange rate pass-through," Globalization Institute Working Papers 282, Federal Reserve Bank of Dallas.
  • Handle: RePEc:fip:feddgw:282
    DOI: 10.24149/gwp282
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    Cited by:

    1. Fernando Alvarez & Francesco Lippi & Juan Passadore, 2017. "Are State- and Time-Dependent Models Really Different?," NBER Macroeconomics Annual, University of Chicago Press, vol. 31(1), pages 379-457.
    2. repec:oup:jeurec:v:16:y:2018:i:2:p:353-382. is not listed on IDEAS
    3. Auer, Raphael & Burstein, Ariel & Lein, Sarah M., 2018. "Exchange Rates and Prices: Evidence from the 2015 Swiss Franc Appreciation," Working papers 2018/23, Faculty of Business and Economics - University of Basel.
    4. Matthias EFING & Rüdiger FAHLENBRACH & Christoph HERPFER & Philipp KRÜGER, 2015. "How Do Investors and Firms React to an Unexpected Currency Appreciation Shock?," Swiss Finance Institute Research Paper Series 15-65, Swiss Finance Institute, revised Jan 2016.
    5. repec:bla:worlde:v:41:y:2018:i:3:p:926-957 is not listed on IDEAS
    6. Fernando Giuliano & Emiliano Luttini, 2019. "Import prices and invoice currency: evidence from Chile," BIS Working Papers 784, Bank for International Settlements.
    7. Binding, Garret & Dibiasi, Andreas, 2017. "Exchange rate uncertainty and firm investment plans evidence from Swiss survey data," Journal of Macroeconomics, Elsevier, vol. 51(C), pages 1-27.
    8. 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.
    9. 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.
    10. 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).

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    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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