We analyze the forecasting ability of financial variables to predict the state of the Swiss business cycle up to eight quarters ahead. Overall, our results suggest that financial variables convey leading information for the prediction of business cycles, even when applied to a small open economy. However, we clearly find that model specifications need to be extended to include variables accounting for external shocks, such as exchange rates or international commodity prices. It also appears that the forecasting contribution of individual variables changes over time. Specifically, in the last two decades, stock market liquidity has replaced the term spread as the best single predictor.

This paper analyzes the Confederation's debt management. The Confederation actively manages roll over and interest rate risk by increasing bond maturity with increasing marketable debt-to-GDP levels. It further engages in active but asymmetric, one-sided interest rate positioning; i.e., it uses mostly bonds to affect debt maturity and does so only when the interest rate environment is favorable to lock-in interest rates by issuing longer-term bonds. Debt management is mainly driven by marketable debt rather than total debt. Issuing behavior became more regular and demand-oriented during the early 1990s when marketable and total debt increased in tandem.