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

Author

Listed:
  • Auer, Raphael
  • Lein, Sarah
  • Burstein, Ariel Tomas
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 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.

Suggested Citation

  • Auer, Raphael & Lein, Sarah & Burstein, Ariel Tomas, 2020. "Exchange Rates and Prices: Evidence from the 2015 Swiss Franc Appreciation," CEPR Discussion Papers 15397, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:15397
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    More about this item

    Keywords

    Large exchange rate shock; Exchange rate pass-through; Invoicing currency; Expenditure switching; Optimal price-setting; Nominal rigidities;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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