The speed of exchange rate pass-through

May 18, 2018
Issue 2018-05

Summary

On January 15, 2015, the Swiss National Bank discontinued its minimum exchange rate policy of one euro against 1.2 Swiss francs. This policy shift resulted in a sharp, unanticipated and permanent appreciation of the Swiss franc by more than 11% against the euro. We analyze the pass-through of this unusually clean exchange rate shock into import unit values at the daily frequency using Swiss transaction-level trade data. Our key findings are twofold. First, for goods invoiced in euros, the pass-through is immediate and complete. Second, for goods invoiced in Swiss francs, the pass-through is partial and exceptionally fast, beginning on the second working day after the exchange rate shock and reaching the medium-run pass-through after twelve working days on average.

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Issue:
05
Pages:
89
JEL classification:
F14, F31, F41
Keywords:
Daily exchange rate pass-through, speed, large exchange rate shock
Year:
2018

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Author(s)

  • Barthélémy Bonadio

  • Andreas M. Fischer

  • Philip U. Sauré

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