The Speed of Exchange Rate Pass-Through

60 Pages Posted: 13 Sep 2016

See all articles by Barthélémy Bonadio

Barthélémy Bonadio

University of Michigan at Ann Arbor - Department of Economics

Andreas M. Fischer

Swiss National Bank; Centre for Economic Policy Research (CEPR)

Philip U. Sauré

Johannes Gutenberg University Mainz - Gutenberg School of Management and Economics; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: 2016-09-01

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.

JEL Classification: F14, F31, F41

Suggested Citation

Bonadio, Barthélémy and Fischer, Andreas M. and Sauré, Philip U., The Speed of Exchange Rate Pass-Through (2016-09-01). Globalization and Monetary Policy Institute Working Paper No. 282. Available at SSRN: https://ssrn.com/abstract=2838121 or http://dx.doi.org/10.24149/gwp282

Barthélémy Bonadio (Contact Author)

University of Michigan at Ann Arbor - Department of Economics ( email )

611 Tappan Street
Ann Arbor, MI 48109-1220
United States

Andreas M. Fischer

Swiss National Bank ( email )

Borsenstrasse 15
CH-8022 Zurich
Switzerland
+41 1 631 3294 (Phone)
+41 1 631 3901 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Philip U. Sauré

Johannes Gutenberg University Mainz - Gutenberg School of Management and Economics ( email )

Germany

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

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