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Journal Article
Open mouth operations: a Swiss case study
Journal Article
Do inflation targeters outperform non-targeters?
Ten years of empirical studies of inflation targeting have not uncovered clear evidence that monetary policy that incorporates formal targets imparts better inflation performance. The authors survey the literature and find that the "no difference" verdict concerning inflation targeting has been robust to a wide range of countries and methods of analysis, starting with a study by Dueker and Fischer (1996a). The authors present updated Markov-switching estimates from the original Dueker and Fischer (1996a) article and show that their early conclusions about inflation targeting among early ...
Working Paper
Portfolio Rebalancing in Times of Stress
This paper investigates time variation in the dynamics of international portfolio equity flows. We extend the empirical model of Hau and Rey (2004) by embedding a two-state Markov regime-switching model into the structural VAR. The model is estimated using monthly data, 1995-2015, on equity returns, exchange rate returns and equity flows between the United States and advanced and emerging economies. We find that the data are consistent with portfolio rebalancing. The estimated states match periods of low and high financial stress. Our main result is that for equity flows between the United ...
Working Paper
Immigrant language barriers and house prices
Are language skills important in explaining the nexus between house prices and immigrant inflows? The language barrier hypothesis says immigrants from a non common language country value amenities more than immigrants from common language countries.> ; In turn, immigrants from non common language countries are less price sensitive to house price changes than immigrants from a common language country. Tests of the language barrier hypothesis with Swiss house prices show that an immigration inflow from a non common language country equal to 1 percent of an area's population is coincident with ...
Report
Shock identification of macroeconomic forecasts based on daily panels
This paper proposes a new procedure for shock identification of macroeconomic forecasts based on factor analysis. Our identification scheme for information shocks relies on data reduction techniques for daily panels and the recognition that macroeconomic releases exhibit a high level of clustering. A large number of data releases on a single day is of considerable practical interest not only for the estimation but also for the identification of the factor model. The clustering of cross-sectional information facilitates the interpretation of the forecast innovations as real or as nominal ...
Journal Article
The mechanics of a successful exchange rate peg: lessons for emerging markets
To the surprise of many market watchers, Thailand?s exchange rate peg to the dollar collapsed in July 1997, leading to similar rounds of currency devaluations in other East Asian countries. This study seeks to determine whether there were identifiable contrasts in implementation between Thailand?s peg and a perennially successful peg?Austria?s peg to the Deutsche mark?that would have hinted at problems for Thailand prior to July 1997. The comparison suggests that Thailand was not sufficiently vigilant about keeping its inflation rate low in the early 1990s. By 1995, Thailand faced a situation ...
Working Paper
The speed of exchange rate pass-through
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 ...
Working Paper
Current Account Adjustment and Retained Earnings
This paper develops a formal strategy to calculate current accounts with retained earnings (RE) on equity investment and analyzes their adjustment during the global financial crisis. RE are the part of companies' profits which are reinvested and not distributed to shareholders as dividends. International statistical standards treat RE on foreign direct investment and RE on portfolio investment differently: while the former enter the current and financial account, the latter do not. We show that this differential treatment strongly affects current accounts of several advanced economies, ...
Report
Time-varying pass-through from import prices to consumer prices: evidence from an event study with real-time data
This paper analyzes the pass-through from import prices to consumer price index (CPI) inflation in real time. Our strategy follows an event-study approach that compares inflation forecasts before and after import price releases. Inflation forecasts are modeled using a dynamic factor procedure that relies on daily panels of Swiss data. We find strong evidence that monthly import price releases provide important information for CPI inflation forecasts, and that the behavior of updated forecasts is consistent with a time-varying pass-through. The robustness of this latter result is supported by ...