Discussion paper

DP11195 The speed of the exchange rate pass-through

This paper analyzes the speed of the exchange rate pass-through into
importer and exporter unit values for a large, unanticipated, and unusually
`clean' exchange rate shock. Our shock originates from the
Swiss National Bank's decision to lift the minimum exchange rate policy
of one euro against 1.2 Swiss francs on January 15, 2015. This
policy action resulted in a permanent appreciation of the Swiss franc
by more than 11% against the euro. We analyze the response of unit
values to this exchange rate shock at the daily frequency for different
invoicing currencies using the universe of Switzerland's transactions-level
trade data. The main finding is that the speed of the exchange
rate pass-through is fast: it starts on the second working day after
the exchange rate shock and reaches the medium-run pass-through
after eight working days on average. Moreover, we decompose the
pass-through by invoicing currencies and find strong evidence that underlying
price adjustments occurred within a similar time frame. Our
observations suggest that nominal rigidities play only a minor role in
the face of large exchange rate shocks.


Fischer, A and P Sauré (eds) (2016), “DP11195 The speed of the exchange rate pass-through”, CEPR Press Discussion Paper No. 11195. https://cepr.org/publications/dp11195