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

Abstract

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 nondurable 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. (JEL E21, E31, F14, F31, L11)

The Production Relocation and Price Effects of US Trade Policy: The Case of Washing Machines

“…Using Belgian manufacturing data,Amiti, Itskhoki, and Konings (2016) document that large firms respond to competitors' cost changes induced by exchange rate changes. Using the 2015 Swiss Franc appreciation as a natural experiment,Auer, Burstein, and Lein (2018) find that prices of Swiss-produced goods fell by more in product categories with larger reductions in border prices.2 These findings reflect a third-country effect from trade policy discussed in various works by Bagwell and Staiger (see Bagwell, Bown, and Staiger 2016, for a review). Our findings are also related to work by Ruhl (2014),…”

Vehicle Currency Pricing and Exchange Rate Pass-Through

“…To derive the implications of our results for consumer price in ‡ation, we would need to match import unit values with the microdata underlying the construction of the UK consumer price index (Auer et al, 2018). These data, however, are not available by invoicing currency.…”

“…Cravino (2014) shows that exchange rate changes a¤ect the prices of …rm-level exports invoiced in the exporter's currency, but have no e¤ect on export prices set in the destination's currency. Auer, Burstein, and Lein (2018) and Bonadio, Fischer, and Sauré (2019) study the large appreciation of the Swiss franc against the euro in 2015. Auer et al (2018) …nd that the consumer prices of imported goods fell by more in product categories with larger reductions in import prices and a lower share of import prices invoiced in Swiss francs.…”

“…Auer, Burstein, and Lein (2018) and Bonadio, Fischer, and Sauré (2019) study the large appreciation of the Swiss franc against the euro in 2015. Auer et al (2018) …nd that the consumer prices of imported goods fell by more in product categories with larger reductions in import prices and a lower share of import prices invoiced in Swiss francs. 9 Bonadio et al 7 A number of recent papers estimate pass-through using …rm-or product-level data.…”

Export-Led Decay: The Trade Channel in the Gold Standard Era

“…Goldberg and Knetter (1997) summarized those and other early works. This debate continued adding other considerations such as the currency of invoicing as discussed and estimated in Gopinath, Itskhoki, and Rigobon (2010) and Auer, Burstein, and Lein (2021). We add to this discussion by also estimating the exchange rate pass-through in Section 3 using large changes in the exchange rate due to changes in regime.…”