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

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

Auer, Raphael and Burstein, Ariel T. and Lein, Sarah, Exchange Rates and Prices: Evidence from the 2015 Swiss Franc Appreciation (October 2020). CEPR Discussion Paper No. DP15397, Available at SSRN: https://ssrn.com/abstract=3723589