http://www.bis.org/cbhub/list/country/country_switzerland/index.rss Latest research hub papers from Switzerland en http://www.snb.ch/n/mmr/reference/working_paper_2013_05/source/working_paper_2013_05.n.pdf Swiss National Bank Working Papers by Matthias Gubler and Matthias S. Hertweck Commodity Price Shocks and the Business Cycle: Structural Evidence for the U.S. 2013-05-02T17:36:00Z This paper evaluates the relative importance of commodity price shocks in the U.S. business cycle. Therefore, we extend the standard set of business cycle shocks to include unexpected changes in commodity prices. The resulting SVAR shows that commodity price shocks are a very important driving force of macroeconomic fluctuations - second only to investment-specific technology shocks - particularly with respect to inflation. Neutral technology shocks and monetary policy shocks, on the other hand, seem less relevant at business cycle frequencies. Neutral technology shocks rather play an important role at low frequencies. Commodity Price Shocks and the Business Cycle: Structural Evidence for the U.S. 2013-05-02T17:36:00Z Full text http://www.snb.ch/n/mmr/reference/working_paper_2013_05/source/working_paper_2013_05.n.pdf Matthias S. Hertweck Matthias Gubler Matthias Gubler and Matthias S. Hertweck 2013-05-02 Swiss National Bank Working Papers http://www.snb.ch/n/mmr/reference/working_paper_2013_03/source/working_paper_2013_03.n.pdf Swiss National Bank Working Papers by Simone Meier Financial Globalization and Monetary Transmission 2013-04-18T12:37:59Z This paper analyzes the way in which international financial integration affects the transmission of monetary policy in a New Keynesian open economy framework. It extends Woodford's (2010) analysis to a model with a richer financial markets structure, allowing for international trading in multiple assets and subject to financial intermediation costs. Two different forms of financial integration are considered, in particular an increase in the level of gross foreign asset holdings and a decrease in the costs of international asset trading. The simulations in the calibrated model show that none of the analyzed forms of financial integration undermine the effectiveness of monetary policy in influencing domestic output and inflation. Under realistic parameterizations, monetary policy is more, rather than less, effective as the positive impact of strengthened exchange rate and wealth channels more than offsets the negative impact of weakened interest rate channels. The paper also analyzes the interaction of financial integration with trade integration, varying both the importance of trade linkages and the degree of exchange rate pass-through. These interactions show that the positive effects of financial integration are amplified by trade integration. Overall, monetary policy is most effective in parameterizations with the highest degree of both financial and real integration. Financial Globalization and Monetary Transmission 2013-04-18T12:37:59Z Full text http://www.snb.ch/n/mmr/reference/working_paper_2013_03/source/working_paper_2013_03.n.pdf Simone Meier Simone Meier 2013-04-18 Swiss National Bank Working Papers E52 F41 F42 F47 http://www.snb.ch/n/mmr/reference/working_paper_2013_04/source/working_paper_2013_04.n.pdf Swiss National Bank Working Papers by Christian Grisse and Thomas Nitschka On financial risk and the safe haven characteristics of Swiss franc exchange rates 2013-04-18T12:37:59Z We analyse bilateral Swiss franc exchange rate returns in an asset pricing framework to evaluate the Swiss franc's safe haven characteristics. A "safe haven" currency is a currency that offers hedging value against global risk, both on average and in particular in crisis episodes. To explore these issues we estimate the relationship between exchange rate returns and risk factors in augmented UIP regressions, using recently developed econometric methods to account for the possibility that the regression coefficients may be changing over time. Our results highlight that in response to increases in global risk the Swiss franc appreciates against the euro as well as against typical carry trade investment currencies such as the Australian dollar, but depreciates against the US dollar, the Yen and the British pound. Thus, the Swiss franc exhibits safe-haven characteristics against many, but not all other currencies. We find statistically significant time variation in the relationship between Swiss franc returns and risk factors, with this link becoming stronger in times of stress. On financial risk and the safe haven characteristics of Swiss franc exchange rates 2013-04-18T12:37:59Z Full text http://www.snb.ch/n/mmr/reference/working_paper_2013_04/source/working_paper_2013_04.n.pdf Thomas Nitschka Christian Grisse Christian Grisse and Thomas Nitschka 2013-04-18 Swiss National Bank Working Papers E32 F44 G15 http://www.snb.ch/n/mmr/reference/working_paper_2013_02/source/working_paper_2013_02.n.pdf Swiss National Bank Working Papers by Nicole Aregger, Martin Brown and Enzo Rossi Transaction Taxes, Capital Gains Taxes and House Prices 2013-03-28T12:37:00Z Motivated by the search for instruments to contain future housing bubbles, we examine the impact of transaction taxes and capital gains taxes on residential house price growth. We exploit the variation in taxation across Swiss cantons, as well as within-canton changes in taxation over time. We relate these taxes to house price growth observed for 92 regions of the country during the period 1985 - 2009. Our results suggest that higher taxes on capital gains exacerbate house price dynamics while transaction taxes have no impact on house price growth. These findings support the existence of a lock-in effect of capital gains taxes on housing supply. They further suggest that taxes on real estate capital gains and transaction values are not suitable measures to prevent excessive house price growth. Transaction Taxes, Capital Gains Taxes and House Prices 2013-03-28T12:37:00Z Full text http://www.snb.ch/n/mmr/reference/working_paper_2013_02/source/working_paper_2013_02.n.pdf Martin Brown Nicole Aregger Enzo Rossi Nicole Aregger, Martin Brown and Enzo Rossi 2013-03-28 Swiss National Bank Working Papers http://www.snb.ch/n/mmr/reference/working_paper_2013_01/source/working_paper_2013_01.n.pdf Swiss National Bank Working Papers by Andreas Kettemann and Signe Krogstrup Portfolio balance effects of the SNB's bond purchase program 2013-03-07T12:39:00Z This paper carries out an empirical investigation of the impact on bond spreads of the announcement, purchases and exit from the SNB's bond purchase program in 2009-2010. We find evidence in favor of a narrowing yield spread of covered bonds as a result of the program. The effect materialized in the days following the announcement of the SNB's intention to buy bonds issued by private sector borrowers, as markets learned that the SNB was buying covered bonds. The specification of the bond spreads used allows us to identify this effect as a discounted portfolio balance effect of the expected purchases, as distinct from policy signalling. In contrast, we find no evidence of a further effect of the actual purchases and subsequent sales on bond spreads. Portfolio balance effects of the SNB's bond purchase program 2013-03-07T12:39:00Z Full text http://www.snb.ch/n/mmr/reference/working_paper_2013_01/source/working_paper_2013_01.n.pdf Signe Krogstrup Andreas Kettemann Andreas Kettemann and Signe Krogstrup 2013-03-05 Swiss National Bank Working Papers http://www.snb.ch/n/mmr/reference/working_paper_2012_16/source/working_paper_2012_16.n.pdf Swiss National Bank Working Papers by Katja Drechsel and Rolf Scheufele Bottom-up or Direct? Forecasting German GDP in a Data-rich Environment 2013-01-07T12:37:00Z This paper presents a method to conduct early estimates of GDP growth in Germany. We employ MIDAS regressions to circumvent the mixed frequency problem and use pooling techniques to summarize efficiently the information content of the various indicators. More specifically, we investigate whether it is better to disaggregate GDP (either via total value added of each sector or by the expenditure side) or whether a direct approach is more appropriate when it comes to forecasting GDP growth. Our approach combines a large set of monthly and quarterly coincident and leading indicators and takes into account the respective publication delay. In a simulated out-of-sample experiment we evaluate the different modelling strategies conditional on the given state of information and depending on the model averaging technique. The proposed approach is computationally simple and can be easily implemented as a nowcasting tool. Finally, this method also allows to retrace the driving forces of the forecast and hence enables the interpretability of the forecast outcome. Bottom-up or Direct? Forecasting German GDP in a Data-rich Environment 2013-01-07T12:37:00Z Full text http://www.snb.ch/n/mmr/reference/working_paper_2012_16/source/working_paper_2012_16.n.pdf Katja Drechsel Rolf Scheufele Katja Drechsel and Rolf Scheufele 2013-01-07 Swiss National Bank Working Papers http://www.snb.ch/n/mmr/reference/working_paper_2012_15/source/working_paper_2012_15.n.pdf Swiss National Bank Working Papers by Raphael Anton Auer What Drives Target2 Balances? Evidence From a Panel Analysis 2012-12-12T10:00:59Z What are the drivers of the large Target2 (T2) balances that have emerged in the European Monetary Union since the start of the financial crisis in 2007? This paper examines the extent to which the evolution of national T2 balances can be statistically associated with cross-border financial flows and current account (CA) balances. In a quarterly panel spanning the years 1999 to 2012 and twelve countries, it is shown that while the CA and the evolution of T2 balances were unrelated until the start of the 2007 financial crisis, since then, the relation between these two variables has become statistically significant and economically sizeable. This reflects the partial "sudden stop" to private sector capital that funded CA imbalances beforehand. I next examine how different types of financial flows have evolved over the last years and how this can be related to the evolution of T2 balances. While changes in cross-border positions in the interbank market are associated with increasing T2 imbalances, cross-border inter-office flows between banks belonging to the same financial institution have reduced T2 imbalances. Flows to the banking sector that originate from private investors and non-financial firms are large in magnitude, but are only weakly correlated with the evolution of T2 balances; changes in banks' holdings of foreign government debt and deposit flows are strongly correlated with the post-2007 evolution of T2 balances. Overall, these findings point to a sizeable transfer of risk from the private to the public sector within T2 creditor nations the via the use of central bank liquidity. What Drives Target2 Balances? Evidence From a Panel Analysis 2012-12-12T10:00:59Z Full text http://www.snb.ch/n/mmr/reference/working_paper_2012_15/source/working_paper_2012_15.n.pdf Raphael Anton Auer Raphael Anton Auer 2012-12-11 Swiss National Bank Working Papers http://www.snb.ch/n/mmr/reference/working_paper_2012_14/source/working_paper_2012_14.n.pdf Swiss National Bank Working Papers by Raphael Anton Auer and Raphael S. Schoenle Market Structure and Exchange Rate Pass-Through 2012-12-12T10:00:59Z In this paper, we examine the extent to which market structure and the way in which it affects pricing decisions of profit-maximizing firms can explain incomplete exchange rate passthrough. To this purpose, we evaluate how pass-through rates vary across trade partners and sectors depending on the mass and size distribution of firms affected by a particular exchange rate shock. In the first step of our analysis, we decompose bilateral exchange rate movements into broad US Dollar (USD) movements and trade-partner currency (TPC) movements. Using micro data on US import prices, we show that the pass-through rate following USD movements is up to four times as large as the pass-through rate following TPC movements and that the rate of pass-through following TPC movements is increasing in the trade partner's sector-specificmarket share. In the second step, we draw on the parsimonious model of oligopoly pricing featuring variable markups of Dornbusch (1987) and Atkeson and Burstein (2008) to show how the distribution of firms' market shares and origins within a sector affects the trade-partner specific pass-through rate. Third, we calibrate this model using our exchange rate decomposition and information on the origin of firms and their market shares. We find that the calibrated model can explain a substantial part of the variation in import price changes and pass-through rates across sectors, trade partners, and sector-trade partner pairs. Market Structure and Exchange Rate Pass-Through 2012-12-12T10:00:59Z Full text http://www.snb.ch/n/mmr/reference/working_paper_2012_14/source/working_paper_2012_14.n.pdf Raphael S. Schoenle Raphael Anton Auer Raphael Anton Auer and Raphael S. Schoenle 2012-12-11 Swiss National Bank Working Papers http://www.snb.ch/n/mmr/reference/working_paper_2012_11/source/working_paper_2012_11.n.pdf Swiss National Bank Working Papers by Raphael Anton Auer, Thomas Chaney and Philip Ulrich Sauré Quality Pricing-to-Market 2012-10-22T17:36:59Z We document that in the European car industry, exchange rate pass-through is larger for low than for high quality cars. To rationalize this pattern, we develop a model of quality pricing and international trade based on the preferences of Musa and Rosen (1978). Firms sell goods of heterogeneous quality to consumers that differ in their willingness to pay for quality. Each firm produces a unique quality of the good and enjoys local market power, which depends on the prices and qualities of its closest competitors. The market power of a firm depends on the prices and qualities of its direct competitors in the quality dimension. The top quality firm, being exposed to just one direct competitor, enjoys the highest market power and equilibrium markup. Because higher quality exporters are closer to the technological leader, markups are generally increasing in quality, exporting is relatively more profitable for high quality than for low quality firms, and the degree of exchange rate pass-through is decreasing in quality. Quality Pricing-to-Market 2012-10-22T17:36:59Z Full text http://www.snb.ch/n/mmr/reference/working_paper_2012_11/source/working_paper_2012_11.n.pdf Thomas Chaney Philip Ulrich Sauré Raphael Anton Auer Raphael Anton Auer, Thomas Chaney and Philip Ulrich Sauré 2012-10-22 Swiss National Bank Working Papers http://www.snb.ch/n/mmr/reference/working_paper_2012_10/source/working_paper_2012_10.n.pdf Swiss National Bank Working Papers by Thomas Nitschka Global and country-specific business cycle risk in time-varying excess returns on asset markets 2012-10-22T17:36:59Z Deviations of national industrial production indexes from trend explain time variation in excess returns on the G7 countries' stock markets. This paper highlights that this finding is driven by a global, common component in the national production gaps. The global component is not a mirror image of the U.S. business cycle. Quite to the contrary, a "rest-ofthe-world" production gap explains time variation in U.S. stock market excess returns while the U.S.-specific production gap does not. However, both U.S.-specific and global gap components explain time-varying excess returns on U.S. bonds. The relative importance of the U.S.-specific risk gap increases with the maturity of bonds. Global and country-specific business cycle risk in time-varying excess returns on asset markets 2012-10-22T17:36:59Z Full text http://www.snb.ch/n/mmr/reference/working_paper_2012_10/source/working_paper_2012_10.n.pdf Thomas Nitschka Thomas Nitschka 2012-10-22 Swiss National Bank Working Papers http://www.snb.ch/n/mmr/reference/working_paper_2012_09/source/working_paper_2012_09.n.pdf Swiss National Bank Working Papers by Bo E. Honoré, Daniel Kaufmann and Sarah Marit Lein Asymmetries in Price-Setting Behavoir: New Microeconometric from Switzerland 2012-10-22T17:36:59Z In this paper we follow the recent empirical literature that has specified reduced-form models for price setting that are closely tied to (S, s)-pricing rules. Our contribution to the literature is twofold. First, we propose an estimator that relaxes distributional assumptions on the unobserved heterogeneity. Second, we use the estimator to examine asymmetries in price-setting behavior. Using micro price data underlying the Swiss CPI we find that a substantial share of asymmetries in the frequency of price changes can be traced back to a rising aggregate price level. We show that asymmetries would be reduced substantially in the absence of aggregate inflation. Asymmetries in Price-Setting Behavoir: New Microeconometric from Switzerland 2012-10-22T17:36:59Z Full text http://www.snb.ch/n/mmr/reference/working_paper_2012_09/source/working_paper_2012_09.n.pdf Daniel Kaufmann Bo E. Honoré Sarah Marit Lein Bo E. Honoré, Daniel Kaufmann and Sarah Marit Lein 2012-10-22 Swiss National Bank Working Papers http://www.snb.ch/n/mmr/reference/working_paper_2012_12/source/working_paper_2012_12.n.pdf Swiss National Bank Working Papers by Sébastien Philippe Kraenzlin and Thomas Nellen Access policy and money market segmentation 2012-10-22T17:36:59Z We analyse deviations between interest rates paid in the Swiss franc unsecured money market and the respective Libor rate. First, banks that have access to the secured interbank market and the SNB's monetary policy operations pay less than banks without access. Second, domestically unchartered, foreign banks pay more than domestic banks. We find that these segmentations are limited both during normal times and during the financial crisis starting 2007 thanks to open access to the secured interbank market and the SNB's monetary policy operations. These findings reveal that a neglected aspect of monetary policy implementation matters, namely access policy. Access policy and money market segmentation 2012-10-22T17:36:59Z Full text http://www.snb.ch/n/mmr/reference/working_paper_2012_12/source/working_paper_2012_12.n.pdf Sébastien Philippe Kraenzlin Thomas Nellen Sébastien Philippe Kraenzlin and Thomas Nellen 2012-10-22 Swiss National Bank Working Papers http://www.snb.ch/n/mmr/reference/working_paper_2012_08/source/working_paper_2012_08.n.pdf Swiss National Bank Working Papers by Romain Baeriswyl and Camille Cornand Reducing overreaction to central banks' disclosures: theory and experiment 2012-07-11T12:37:59Z Financial markets are known for overreacting to public information. Central banks can reduce this overreaction either by disclosing information to a fraction of market participants only (partial publicity) or by disclosing information to all participants but with ambiguity (partial transparency). We show that, in theory, both communication strategies are strictly equivalent in the sense that overreaction can be indifferently mitigated by reducing the degree of publicity or by reducing the degree of transparency. We run a laboratory experiment to test whether theoretical predictions hold in a game played by human beings. In line with theory, the experiment does not allow the formulation of a clear preference in favor of either communication strategy. This paper then discusses the opportunity for central banks to choose between partial transparency and partial publicity to control market reaction to their disclosures. Reducing overreaction to central banks' disclosures: theory and experiment 2012-07-11T12:37:59Z Full text http://www.snb.ch/n/mmr/reference/working_paper_2012_08/source/working_paper_2012_08.n.pdf Romain Baeriswyl Camille Cornand Romain Baeriswyl and Camille Cornand 2012-07-11 Swiss National Bank Working Papers C92 D82 D84 E58 http://www.snb.ch/n/mmr/reference/working_paper_2012_07/source/working_paper_2012_07.n.pdf Swiss National Bank Working Papers by Christian Hott and Terhi Jokipii Housing Bubbles and Interest Rates 2012-07-10T17:38:59Z In this paper we assess whether persistently too low interest rates can cause housing bubbles. For a sample of 14 OECD countries, we calculate the deviations of house prices from their (theoretically implied) fundamental value and define them as bubbles. We then estimate the impact that a deviation of short term interest rates from the Taylor-implied interest rates have on house price bubbles. We additionally assess whether interest rates that have remained low for a longer period of time have a greater impact on house price overvaluation. Our results indicate that there is a strong link between low interest rates and housing bubbles. This impact is especially strong when interest rates are "too low for too long". We argue that, by ensuring that rates do not deviate too far from Taylorimplied rates, central banks could lean against house price fluctuations without considering house price developments directly. If this is not possible, e.g. because a single monetary policy is confronted with a very heterogenous economic development within the currency area, alternative counter cyclical measures have to be considered. Housing Bubbles and Interest Rates 2012-07-10T17:38:59Z Full text http://www.snb.ch/n/mmr/reference/working_paper_2012_07/source/working_paper_2012_07.n.pdf Christian Hott Terhi Jokipii Christian Hott and Terhi Jokipii 2012-07-10 Swiss National Bank Working Papers E52 G12 R21 http://www.snb.ch/n/mmr/reference/working_paper_2012_05/source/working_paper_2012_05.n.pdf Swiss National Bank Working Papers by Martin Brown, Steven Ongena and Pinar Yesin Information Asymmetry and Foreign Currency Borrowing by Small Firms 2012-06-28T12:37:59Z We model the choice of loan currency in a framework which features a trade-off between lower cost of debt and the risk of firm-level distress costs. Under perfect information, if foreign currency funds come at a lower interest rate, all foreign currency earners as well as those local currency earners with high revenues and/or low distress costs choose foreign currency loans. When the banks have imperfect information on the currency and level of firm revenues, even more local earners switch to foreign currency loans, as they do not bear the full cost of the corresponding credit risk. Thus information asymmetry between banks and firms can be a potential driver of "dollarization" in credit markets. Information Asymmetry and Foreign Currency Borrowing by Small Firms 2012-06-28T12:37:59Z Full text http://www.snb.ch/n/mmr/reference/working_paper_2012_05/source/working_paper_2012_05.n.pdf Steven Ongena Pinar Yesin Martin Brown Martin Brown, Steven Ongena and Pinar Yesin 2012-06-28 Swiss National Bank Working Papers F34 F37 G21 G30 http://www.snb.ch/n/mmr/reference/working_paper_2012_06/source/working_paper_2012_06.n.pdf Swiss National Bank Working Papers by Philip Ulrich Sauré and Hosny Zoabi Retirement Age across Countries: The Role of Occupations 2012-06-28T12:37:59Z Cross-country variation in average retirement age is usually attributed to institutional differences that affect individuals' incentives to retire. We suggest a different approach. Since workers in different occupations naturally retire at different ages, the composition of occupations within an economy matters for its average retirement age. Using U.S. data we infer the average retirement age by occupation, which we then use to predict the retirement age of 38 countries according to the occupational composition of these countries. Our findings suggest that the differences in occupational composition explain up to 39.2% of the observed cross-country variation in retirement age. Retirement Age across Countries: The Role of Occupations 2012-06-28T12:37:59Z Full text http://www.snb.ch/n/mmr/reference/working_paper_2012_06/source/working_paper_2012_06.n.pdf Philip Ulrich Sauré Hosny Zoabi Philip Ulrich Sauré and Hosny Zoabi 2012-06-28 Swiss National Bank Working Papers J14 J24 J26 J82 http://www.snb.ch/n/mmr/reference/working_paper_2012_04/source/working_paper_2012_04.n.pdf Swiss National Bank Working Papers by Thomas Nitschka Banking sector's international interconnectedness: Implications for consumption risk sharing in Europe 2012-04-27T17:38:59Z Cross-border asset and liability holdings allow countries to insulate their consumption streams from idiosyncratic output shocks, i.e. consumption risk sharing. By contrast, banks' international interconnectedness spread the U.S. subprime mortgage crisis to variouseconomies with adverse macroeconomic consequences. This paper evaluates the partial impact of banks' cross-border links on the ability of their host countries to share consumption risk internationally. It shows that the impact of banks' links to the non-bank sector in the rest-of-the-world on consumption risk sharing is negligible while strong interbank links are associated with relatively little consumption risk sharing of banks' host countries. Banking sector's international interconnectedness: Implications for consumption risk sharing in Europe 2012-04-27T17:38:59Z Full text http://www.snb.ch/n/mmr/reference/working_paper_2012_04/source/working_paper_2012_04.n.pdf Thomas Nitschka Thomas Nitschka 2012-04-27 Swiss National Bank Working Papers E2 F15 G15 http://www.snb.ch/n/mmr/reference/working_paper_2012_03/source/working_paper_2012_03.n.pdf Swiss National Bank Working Papers by Matteo Bonato, Massimiliano Caporin and Angelo Ranaldo Risk spillovers in international equity portfolios 2012-04-20T12:39:00Z We define risk spillover as the dependence of a given asset variance on the past covariances and variances of other assets. Building on this idea, we propose the use of a highly flexible and tractable model to forecast the volatility of an international equity portfolio. According to the risk management strategy proposed, portfolio risk is seen as a specific combination of daily realized variances and covariances extracted froma high frequency dataset, which includes equities and currencies. In this framework, we focus on the risk spillovers across equities within the same sector (sector spillover), and fromcurrencies to international equities (currency spillover). We compare these specific risk spillovers to a more general framework (full spillover) whereby we allow for lagged dependence across all variances and covariances. The forecasting analysis shows that considering only sector- and currency-risk spillovers, rather than full spillovers, improves performance, both in economic and statistical terms. Risk spillovers in international equity portfolios 2012-04-20T12:39:00Z Full text http://www.snb.ch/n/mmr/reference/working_paper_2012_03/source/working_paper_2012_03.n.pdf Matteo Bonato Massimiliano Caporin Angelo Ranaldo Matteo Bonato, Massimiliano Caporin and Angelo Ranaldo 2012-04-20 Swiss National Bank Working Papers C13 C16 C22 C51 C53 G17 http://www.snb.ch/n/mmr/reference/working_paper_2012_02/source/working_paper_2012_02.n.pdf Swiss National Bank Working Papers by Signe Krogstrup, Samuel Reynard and Barbara Sutter Liquidity Effects of Quantitative Easing on Long-Term Interest Rates 2012-04-20T12:39:00Z This paper argues that the expansion in reserves following recent quantitative easing programs of the Federal Reserve may have affected long-term interest rates through liquidity effects. The data lends some support for liquidity effects, in that reserves were negatively correlated with long-term yields at the zero lower bound. Estimates suggest that between January 2009 and 2011, 10-year US Treasury yields fell 46-85 basis points as a result of liquidity effects. The liquidity effect is separate from the portfolio balance effect of the change in the public supply of Treasury bonds, which is estimated to have reduced yields by another 20 basis points during that period. Liquidity Effects of Quantitative Easing on Long-Term Interest Rates 2012-04-20T12:39:00Z Full text http://www.snb.ch/n/mmr/reference/working_paper_2012_02/source/working_paper_2012_02.n.pdf Signe Krogstrup Samuel Reynard Barbara Sutter Signe Krogstrup, Samuel Reynard and Barbara Sutter 2012-04-20 Swiss National Bank Working Papers E43 E52 E58 http://www.snb.ch/n/mmr/reference/working_paper_2012_01/source/working_paper_2012_01.n.pdf Swiss National Bank Working Papers by Raphael Anton Auer Exchange Rate Pass-Through, Domestic Competition,and Inflation: Evidence from the 2005/08 Revaluationof the Renminbi 2012-03-06T12:39:59Z This paper quantifies the effect of the government-controlled appreciation of the Chinese renminbi (RMB) vis-à-vis the USD from 2005 to 2008 on the prices charged by US producers. As the RMB during that time was pegged to a basket of currencies, the empirical strategy must account for the fact that the currencies included in the basket may have directly affected US prices. Thus, the pre-2005 period is used to filter out the effects of other exchange rates on import and producer prices. Additionally, utilizing the remainder of the sample, the pure effect of an RMB appreciation on US import prices and, in turn, the effect of RMB-induced US import price fluctuations on US producer prices is established. In a panel spanning the period from 1994 to 2010 and including 417 manufacturing sectors, the main finding emerging from this empirical strategy is that import prices pass into producer prices at an average rate of 0.7. This finding supports the view that the markets for domestic and imported manufactured goods are well integrated. Consequently, even if the exchange rate affects import prices only to a small extent, it may have a substantial impact on inflation, as it exerts a sizeable impact on the competitive environment of domestic producers and the prices that they charge. Exchange Rate Pass-Through, Domestic Competition,and Inflation: Evidence from the 2005/08 Revaluationof the Renminbi 2012-03-06T12:39:59Z Full text http://www.snb.ch/n/mmr/reference/working_paper_2012_01/source/working_paper_2012_01.n.pdf Raphael Anton Auer Raphael Anton Auer 2012-03-06 Swiss National Bank Working Papers E31 F11 F12 F14 F15 F16 F40 L16 http://www.snb.ch/n/mmr/reference/working_paper_2011_13/source/working_paper_2011_13.n.pdf Swiss National Bank Working Papers by Kaufmann Sylvia K-state switching models with endogenous transition distributions 2012-01-27T17:38:59Z Two Bayesian sampling schemes are outlined to estimate a K-state Markov switching model with time-varying transition probabilities. The multinomial logit model for the transition probabilities is alternatively expressed as a random utility model and as a difference random utility model. The estimation uses data augmentation and both sampling schemes can be based on Gibbs sampling. Based on the model estimate, we are able to discriminate the model against a smooth transition model, in which the state probability may be influenced by a variable, but without depending on the past prevailing state. Formulating a definition allows to determine the relevant threshold level of the covariate influencing the transition distribution without resorting to the usual grid search. Identification issues are addressed with random permutation sampling. In terms of efficiency the extension to difference random utility in combination with random permutation sampling performs best. To illustrate the method, we estimate a two-pillar Phillips curve for the euro area, in which the inflation rate depends on the low-frequency components of M3 growth, real GDP growth and the change in the government bond yield, and on the highfrequency component of the output gap. Using recent data series, the effect of the low-frequency component of M3 growth depends on regimes determined by lagged credit growth. K-state switching models with endogenous transition distributions 2012-01-27T17:38:59Z Full text http://www.snb.ch/n/mmr/reference/working_paper_2011_13/source/working_paper_2011_13.n.pdf Kaufmann Sylvia Kaufmann Sylvia 2012-01-27 Swiss National Bank Working Papers http://www.snb.ch/n/mmr/reference/working_paper_2011_14/source/working_paper_2011_14.n.pdf Swiss National Bank Working Papers by Sébastien Philippe Kraenzlin and Benedikt von Scarpatetti Bargaining Power in the Repo Market 2012-01-27T17:38:59Z In this paper, we analyze the price setting behavior of banks in the Swiss franc repo market by means of network topology concepts and measures. The sample ranges from October 1999 to December 2009. Hence, it covers a large part of the money market turmoil that started in August 2007. Among others, we find evidence that market participants use their bargaining power as well as private information between two trading partners for price differentiation. The effect of the bargaining power was even more pronounced during the financial turmoil. Bargaining Power in the Repo Market 2012-01-27T17:38:59Z Full text http://www.snb.ch/n/mmr/reference/working_paper_2011_14/source/working_paper_2011_14.n.pdf Benedikt von Scarpatetti Sébastien Philippe Kraenzlin Sébastien Philippe Kraenzlin and Benedikt von Scarpatetti 2012-01-27 Swiss National Bank Working Papers http://www.snb.ch/n/mmr/reference/working_paper_2011_11/source/working_paper_2011_11.n.pdf Swiss National Bank Working Papers by Massimiliano Caporin and Angelo Ranaldo On the Predictability of Stock Prices: a Case for High and Low Prices 2011-11-14T12:41:00Z Contrary to the common wisdom that asset prices are hardly possible to forecast, we show that high and low prices of equity shares are largely predictable. We propose to model them using a simple implementation of a fractional vector autoregressive model with error correction (FVECM). This model captures two fundamental patterns of high and low prices: their cointegrating relationship and the long memory of their difference (i.e. the range), which is a measure of realized volatility. Investment strategies based on FVECM predictions of high/low US equity prices as exit/entry signals deliver a superior performance even on a risk-adjusted basis. On the Predictability of Stock Prices: a Case for High and Low Prices 2011-11-14T12:41:00Z Full text http://www.snb.ch/n/mmr/reference/working_paper_2011_11/source/working_paper_2011_11.n.pdf Massimiliano Caporin Angelo Ranaldo Massimiliano Caporin and Angelo Ranaldo 2011-11-14 Swiss National Bank Working Papers http://www.snb.ch/n/mmr/reference/working_paper_2011_12/source/working_paper_2011_12.n.pdf Swiss National Bank Working Papers by Jürg Mägerle and Thomas Nellen Interoperability between central counterparties 2011-11-14T12:41:00Z In reaction to recent requests for interoperability between central counterparties of European stock markets, regulators have issued new guidelines to contain systemic risk. Our analysis confirms that the currently applied cross-CCP risk management model can be a source of contagion, particularly if applied in multilateral frameworks. While regulators' new guidelines eliminate systemic risk, this comes at the cost of an inefficiently overcollateralised clearing system. We discuss further approaches that contain systemic risk while reducing or eliminating overcollateralisation. Interoperability is of economic importance as it may contribute to the efficiency and safety of a worldwide fragmented clearing infrastructure. Interoperability between central counterparties 2011-11-14T12:41:00Z Full text http://www.snb.ch/n/mmr/reference/working_paper_2011_12/source/working_paper_2011_12.n.pdf Jürg Mägerle Thomas Nellen Jürg Mägerle and Thomas Nellen 2011-11-14 Swiss National Bank Working Papers http://www.snb.ch/n/mmr/reference/working_paper_2011_10/source/working_paper_2011_10.n.pdf Swiss National Bank Working Papers by Raphael Anton Auer and Philip Ulrich Sauré Spatial Competition in Quality, Demand-Induced Innovation, and Schumpeterian Growth 2011-09-01T17:38:00Z Spatial Competition in Quality, Demand-Induced Innovation, and Schumpeterian Growth 2011-09-01T17:38:00Z Full text http://www.snb.ch/n/mmr/reference/working_paper_2011_10/source/working_paper_2011_10.n.pdf Philip Ulrich Sauré Raphael Anton Auer Raphael Anton Auer and Philip Ulrich Sauré 2011-09-01 Swiss National Bank Working Papers