DP15397 Exchange Rates and Prices: Evidence from the 2015 Swiss Franc Appreciation

Author(s):	Raphael Auer, Ariel Tomas Burstein, Sarah Lein
Publication Date:	October 2020
Keyword(s):	exchange rate pass-through, Expenditure Switching, invoicing currency, large exchange rate shock, nominal rigidities, Optimal price-setting
JEL(s):	F12, F31, F41, L11
Programme Areas:	International Trade and Regional Economics, International Macroeconomics and Finance, Monetary Economics and Fluctuations
Link to this Page:	cepr.org/active/publications/discussion_papers/dp.php?dpno=15397

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.