Exchange Rates and Prices: Evidence from the 2015 Swiss Franc Appreciation
129 Pages Posted: 3 Nov 2020
Date Written: October 2020
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.
Keywords: exchange rate pass-through, Expenditure Switching, invoicing currency, large exchange rate shock, nominal rigidities, Optimal price-setting
JEL Classification: F12, F31, F41, L11
Suggested Citation: Suggested Citation