http://www.snb.ch/fr/ifor/media/id/media_rss Les Swiss National Bank Working Papers présentent les résultats des recherches en cours. Ils visent à susciter des commentaires et à encourager les débats. Les opinions défendues dans les Working Papers sont celles des auteurs et ne concordent pas nécessairement avec les vues de la Banque nationale suisse. Les articles publiés dans les cahiers de la série Swiss National Bank Economic Studies traitent divers sujets économiques et financiers en rapport avec les tâches de la Banque nationale suisse. Les analyses et les conclusions qu'ils présentent n'engagent que leurs auteurs. Le fait qu'elles soient publiées par la Banque nationale suisse n'implique pas que cette dernière les partage. BNS Copyright © 2012, Banque nationale suisse, Zurich/Berne (Suisse) http://www.snb.ch/fr/system/disclaimer http://www.snb.ch/n/mmr/reference/working_paper_2012_04/source/working_paper_2012_04.n.pdf 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. 2012-04-27T13:46:17.107+01:00 en Banking sector's international interconnectedness: Implications for consumption risk sharing in Europe Banking sector's international interconnectedness: Implications for consumption risk sharing in Europe 2012-04-27T13:46:17.107+01:00 banking sector cross-border assets consumption risk sharing interconnectedness systemic risk Banking sector's international interconnectedness: Implications for consumption risk sharing in Europe http://www.snb.ch/n/mmr/reference/working_paper_2012_04/source/working_paper_2012_04.n.pdf PDF version Thomas Nitschka Thomas Nitschka Thomas Nitschka 2012 SNB Working Papers 2012-04 E2 F15 G15 http://www.snb.ch/n/mmr/reference/working_paper_2012_03/source/working_paper_2012_03.n.pdf 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. 2012-04-20T11:24:21.057+01:00 en Risk spillovers in international equity portfolios Risk spillovers in international equity portfolios 2012-04-20T11:24:21.057+01:00 Risk spillover portfolio risk currency risk variance forecasting international portfolio Wishart distribution Risk spillovers in international equity portfolios http://www.snb.ch/n/mmr/reference/working_paper_2012_03/source/working_paper_2012_03.n.pdf PDF version Matteo Bonato Matteo Bonato Massimiliano Caporin Massimiliano Caporin Angelo Ranaldo Angelo Ranaldo Matteo Bonato, Massimiliano Caporin and Angelo Ranaldo 2012 SNB Working Papers 2012-03 C13 C16 C22 C51 C53 G17 http://www.snb.ch/n/mmr/reference/working_paper_2012_02/source/working_paper_2012_02.n.pdf 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. 2012-04-20T11:24:17.137+01:00 en Liquidity Effects of Quantitative Easing on Long-Term Interest Rates Liquidity Effects of Quantitative Easing on Long-Term Interest Rates 2012-04-20T11:24:17.137+01:00 Quantitative Easing Reserves Liquidity Effect Long-Term Interest Rates Zero Lower Bound Monetary Policy Portfolio Balance Liquidity Effects of Quantitative Easing on Long-Term Interest Rates http://www.snb.ch/n/mmr/reference/working_paper_2012_02/source/working_paper_2012_02.n.pdf PDF version Signe Krogstrup Signe Krogstrup Samuel Reynard Samuel Reynard Barbara Sutter Barbara Sutter Signe Krogstrup, Samuel Reynard and Barbara Sutter 2012 SNB Working Papers 2012-02 E43 E52 E58 http://www.snb.ch/n/mmr/reference/working_paper_2012_01/source/working_paper_2012_01.n.pdf 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. 2012-03-23T09:08:16.043+01:00 en Exchange Rate Pass-Through, Domestic Competition, and Inflation: Evidence from the 2005/08 Revaluation of the Renminbi Exchange Rate Pass-Through, Domestic Competition, and Inflation: Evidence from the 2005/08 Revaluation of the Renminbi 2012-03-23T09:08:16.043+01:00 Price Complementarities Exchange Rate Pass Through China Inflation Markups Exchange Rate Pass-Through, Domestic Competition, and Inflation: Evidence from the 2005/08 Revaluation of the Renminbi http://www.snb.ch/n/mmr/reference/working_paper_2012_01/source/working_paper_2012_01.n.pdf PDF version Raphael Anton Auer Raphael Anton Auer Raphael Anton Auer 2012 SNB Working Papers 2012-01 F11 F12 F14 F15 F16 F40 E31 L16 http://www.snb.ch/n/mmr/reference/working_paper_2011_13/source/working_paper_2011_13.n.pdf 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. 2012-01-27T16:53:39.280+01:00 en K-state switching models with endogenous transition distributions K-state switching models with endogenous transition distributions 2012-01-27T16:53:39.280+01:00 Bayesian analysis credit M3 growth Markov switching Phillips curve permutation sampling threshold level time-varying probabilities K-state switching models with endogenous transition distributions http://www.snb.ch/n/mmr/reference/working_paper_2011_13/source/working_paper_2011_13.n.pdf PDF version Kaufmann Sylvia Kaufmann Sylvia Kaufmann Sylvia 2011 SNB Working Papers 2011-13 C11 C22 E31 E52 http://www.snb.ch/n/mmr/reference/working_paper_2011_14/source/working_paper_2011_14.n.pdf 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. 2012-01-27T16:53:35.937+01:00 en Bargaining Power in the Repo Market Bargaining Power in the Repo Market 2012-01-27T16:53:35.937+01:00 interbank market repo network money market turmoil financial stability pricing bargaining power Switzerland Bargaining Power in the Repo Market http://www.snb.ch/n/mmr/reference/working_paper_2011_14/source/working_paper_2011_14.n.pdf PDF version Sébastien Philippe Kraenzlin Sébastien Philippe Kraenzlin Benedikt von Scarpatetti Benedikt von Scarpatetti Sébastien Philippe Kraenzlin and Benedikt von Scarpatetti 2011 SNB Working Papers 2011-14 D85 E43 E58 G14 G21 G28 http://www.snb.ch/n/mmr/reference/working_paper_2011_12/source/working_paper_2011_12.n.pdf 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. 2011-11-14T11:13:37.080+01:00 en Interoperability between central counterparties Interoperability between central counterparties 2011-11-14T11:13:37.080+01:00 interoperability between central counterparties financial network systemic risk netting efficiency Interoperability between central counterparties http://www.snb.ch/n/mmr/reference/working_paper_2011_12/source/working_paper_2011_12.n.pdf PDF version Jürg Mägerle Jürg Mägerle Thomas Nellen Thomas Nellen Jürg Mägerle and Thomas Nellen 2011 SNB Working Papers 2011-12 E42 E58 G01 G28 http://www.snb.ch/n/mmr/reference/working_paper_2011_11/source/working_paper_2011_11.n.pdf 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. 2011-11-14T11:13:32.783+01:00 en On the Predictability of Stock Prices: a Case for High and Low Prices On the Predictability of Stock Prices: a Case for High and Low Prices 2011-11-14T11:13:32.783+01:00 high and low prices predictability of asset prices range fractional cointegration exit/entry trading signals chart/technical analysis On the Predictability of Stock Prices: a Case for High and Low Prices http://www.snb.ch/n/mmr/reference/working_paper_2011_11/source/working_paper_2011_11.n.pdf PDF version Massimiliano Caporin Massimiliano Caporin Angelo Ranaldo Angelo Ranaldo Massimiliano Caporin and Angelo Ranaldo 2011 SNB Working Papers 2011-11 G11 G17 C53 C58 http://www.snb.ch/n/mmr/reference/working_paper_2011_10/source/working_paper_2011_10.n.pdf We develop a general equilibrium model of vertical innovation in which multiple firms compete monopolistically in the quality space. The model features many firms, each of which holds the monopoly to produce a unique quality level of an otherwise homogenous good, and consumers who are heterogeneous in their valuation of the good's quality. If the marginal cost of production is convex with respect to quality, multiple rms coexist, and their equilibrium markups are determined by the degree of convexity and the density of quality-competition. To endogenize the latter, we nest this industry setup in a Schumpeterian model of endogenous growth. Each firm enters the industry as the technology leader and successively transits through the product cycle as it is superseded by further innovations. The intrinsic reason that innovation happens in our economy is not one of displacing the incumbent; rather, innovation is a means to di-erentiate oneself from existing firms and target new consumers. Aggregate growth arises if, on the one hand, increasingly wealthy consumers are willing to pay for higher quality and, on the other hand, private firms' innovation generates income growth by enlarging the set of available technologies. Because the frequency of innovation determines the toughness of product market competition, in our framework, the relation between growth and competition is reversed compared to the standard Schumpeterian framework. Our setup does not feature business stealing in the sense that already marginal innovations grant non-negligible prots. Rather, innovators sell to a set of consumers that was served relatively poorly by pre-existing firms. Nevertheless, "creative destruction" prevails as new entrants make the set of available goods more di-erentiated, thereby exerting a pro-competitive e-ect on the entire industry. 2011-09-01T16:44:31+01:00 en Spatial Competition in Quality, Demand-Induced Innovation, and Schumpeterian Growth Spatial Competition in Quality, Demand-Induced Innovation, and Schumpeterian Growth 2011-09-01T16:44:31+01:00 Spatial Competition in Quality, Demand-Induced Innovation, and Schumpeterian Growth http://www.snb.ch/n/mmr/reference/working_paper_2011_10/source/working_paper_2011_10.n.pdf PDF version Raphael Anton Auer Raphael Anton Auer Philip Ulrich Sauré Philip Ulrich Sauré Raphael Anton Auer and Philip Ulrich Sauré 2011 SNB Working Papers 2011-10 http://www.snb.ch/n/mmr/reference/working_paper_2011_09/source/working_paper_2011_09.n.pdf What is the impact of import competition from low-wage countries (LWCs) on inflationary pressure in Europe? This paper examines whether labor-intensive exports from emerging Europe, Asia, and other global regions have a uniform impact on producer prices in Germany, France, Italy, Sweden, and the United Kingdom. In a panel covering 110 (4-digit) NACE industries from 1995 to 2008, instrumental variable estimations predict that LWC import competition is associated with strong price effects. More specifically, when LWC exporters capture 1% of European market share, producer prices decrease by about 3%. In contrast, no effect is present for import competition from low-wage countries in Central and Eastern Europe. Next, decomposing the mechanisms that underlie the LWC price effect on European industry, we show that import competition has a pronounced effect on average productivity and only a muted effect on wages. Owing to the exit of firms and the increase in productivity, LWC import competition is shown to have substantially reduced employment in the European manufacturing sector. 2011-08-15T16:03:29+01:00 en Low-Wage Import Competition, Inflationary Pressure,and Industry Dynamics in Europe Low-Wage Import Competition, Inflationary Pressure,and Industry Dynamics in Europe 2011-08-15T16:03:29+01:00 intra-industry trade comparative advantage globalization Low-Wage Import Competition, Inflationary Pressure,and Industry Dynamics in Europe http://www.snb.ch/n/mmr/reference/working_paper_2011_09/source/working_paper_2011_09.n.pdf PDF version Raphael Anton Auer Raphael Anton Auer Kathrin Degen Kathrin Degen Andreas M. Fischer Andreas M. Fischer Raphael Anton Auer, Kathrin Degen and Andreas M. Fischer 2011 SNB Working Papers 2011-09 F11 F12 F14 F16 F40 http://www.snb.ch/n/mmr/reference/working_paper_2011_08/source/working_paper_2011_08.n.pdf This paper investigates the speed and completeness of the pass-through from market rates to mortgage rates in Switzerland. The pass-through dynamics are studied under a marginal funding cost perspective. By choosing the appropriate benchmark rates, this study takes into account banks' forecasts of the evolution of their funding costs. It is found that the passthrough of rates of adjustable-rate mortgages is incomplete and sluggish compared to the rates of mortgages with a fixed maturity. For the latter, changes in market rates appear to be transmitted quickly and completely, particularly when benchmark rates are falling. This finding suggests that a low-interest-rate environment stimulates competition among financial institutions. Evidence for a structural change is found for all interest rates. The structural change occurred around the beginning of 2007 for fixed-rate mortgages and in mid-2005 for floating-rate mortgages. For all mortgage rates, asymmetries are detected in the pre-break period. More specifically, the adjustment of fixed-rate-mortgage rates is characterized by downward rigidity, which supports the existence of some form of imperfect competition. By contrast, the rates of adjustable-rate mortgages exhibit upward price stickiness. This result suggests that competition was stronger in this specific mortgage-lending market. In the post-break period, no clear evidence is found in favor of asymmetries with respect to the adjustment coefficient. 2011-07-05T15:31:25+01:00 en Mortgage Rate Pass-Through in Switzerland Mortgage Rate Pass-Through in Switzerland 2011-07-05T15:31:25+01:00 Interest Rate Pass-Through Monetary Policy Mortgages Cointegration analysis Panel Data Mortgage Rate Pass-Through in Switzerland http://www.snb.ch/n/mmr/reference/working_paper_2011_08/source/working_paper_2011_08.n.pdf PDF version Iva Cecchin Iva Cecchin Iva Cecchin 2011 SNB Working Papers 2011-08 E43 E52 G21 C23 http://www.snb.ch/n/mmr/reference/working_paper_2011_07/source/working_paper_2011_07.n.pdf This paper disentangles fluctuations in disaggregate prices into macroeconomic and idiosyncratic components using a factor-augmented vector autoregression (FAVAR) in order to shed light on sectoral inflation dynamics in Switzerland. We find that disaggregated prices react only slowly to monetary policy and other macroeconomic shocks, but relatively quickly to idiosyncratic shocks. We document that there is a large heterogeneity across sectors in the reaction to monetary policy shocks and show that sectors with larger volatility of idiosyncratic shocks react more readily to monetary policy. This finding stands in contrast to the rational inattention model of price setting. We also find that sectors, which change prices infrequently, react less strongly but if they do change their prices, they adjust them by a large amount. This suggests that the source of sluggish response to aggregate shocks is heterogeneity in menu costs rather than rational inattention. Furthermore, even though prices respond with a significant delay to identified monetary policy shocks, we find no evidence of a price puzzle on average. For single sectors, however, we still find a hump-shaped response which can partially be explained by the fact that, by law, rents are tied to interest rates in Switzerland. 2011-06-26T22:11:07+01:00 en Sectoral Inflation Dynamics, Idiosyncratic Shocks and Monetary Policy Sectoral Inflation Dynamics, Idiosyncratic Shocks and Monetary Policy 2011-06-26T22:11:07+01:00 monetary policy transmission idiosyncratic shocks rational inattention heterogeneity in price setting cost channel price puzzle Sectoral Inflation Dynamics, Idiosyncratic Shocks and Monetary Policy http://www.snb.ch/n/mmr/reference/working_paper_2011_07/source/working_paper_2011_07.n.pdf PDF version Daniel Kaufmann Daniel Kaufmann Sarah Lein Sarah Lein Daniel Kaufmann and Sarah Lein 2011 SNB Working Papers 2011-07 E31 E4 E5 C3 http://www.snb.ch/n/mmr/reference/working_paper_2011_06/source/working_paper_2011_06.n.pdf Central banks have won in credibility as from the mid-eighties by keeping inflation under control. However, confidence in low inflation might have encouraged agents to excessive risk-taking, leading asset prices to rise. Moreover, the belief in a Federal Reserve guarantee against a sharp market decline spread across US markets as from the nineties. This belief, commonly referred to as the Greenspan put, raised again the question about the role of asset prices in monetary policy decisions. The problem is addressed by modeling the reaction of the Fed to stockmarket deviations from fundamentals over the period stretching from August 1987 to October 2008, which corresponds to the periods where Greenspan until January 2006 and Bernanke from thereon were chairmen. A Taylor rule describing the Fed's nominal feedback rule to inflation and economic activity on a monthly basis is extended to take account of asset prices. The indicators considered are deflation and volatility in stock prices. Furthermore, a Markov switching process allows to capture contemporaneous as well as forward-looking monetary policy responses to asset prices over the period. We find out that taking asset price deflation improves the Taylor rule fit by some 8%. In periods when the Fed was actively pursuing an expansive or restrictive monetary policy, its reaction to volatility or deflation of financial markets was significant. We also see that the reaction of the Fed to asset prices was greater during financial crises, especially when modeling a forward-looking decision process. Agents' confidence in a stronger response of the US central bank to significant market declines urging to an easing of monetary conditions in their favour was therefore not unfounded. 2011-06-26T22:11:06+01:00 en Is there any evidence of a Greenspan put? Is there any evidence of a Greenspan put? 2011-06-26T22:11:06+01:00 monetary policy nominal feedback rule asset prices United States Is there any evidence of a Greenspan put? http://www.snb.ch/n/mmr/reference/working_paper_2011_06/source/working_paper_2011_06.n.pdf PDF version Hall Pamela Hall Pamela Hall Pamela 2011 SNB Working Papers 2011-06 C11 C22 E44 E52 E58 http://www.snb.ch/n/mmr/reference/working_paper_2011_05/source/working_paper_2011_05.n.pdf To date, various central banks have lacked detailed statistical evidence on developments in the unsecured interbank money market. Furfine (1999) introduced the idea of calculating unsecured overnight interbank lending by using data of a RTGS system. Based on data from the Swiss payment system (SIC) we developed an algorithm to identify unsecured interbank loans in Swiss francs. In contrast to Furfine (1999) we also identify longer-term transactions. We thereby gain a deeper insight on the size and structure of the unsecured interbank money market in Swiss francs. This is the first time that SIC data have been used to identify transactions and market rates in the unsecured Swiss franc money market. Overall, the estimates show that after the collapse of Lehman Brothers loss of confidence led to a freezing-up of the market for several months and a decrease in daily turnover. 2011-06-26T22:11:05+01:00 en Exploring an uncharted market: Evidence on the unsecured Swiss franc money market Exploring an uncharted market: Evidence on the unsecured Swiss franc money market 2011-06-26T22:11:05+01:00 unsecured interbank money market development money market turmoil financial stability Switzerland Exploring an uncharted market: Evidence on the unsecured Swiss franc money market http://www.snb.ch/n/mmr/reference/working_paper_2011_05/source/working_paper_2011_05.n.pdf PDF version Basil Guggenheim Basil Guggenheim Sébastien Philippe Kraenzlin Sébastien Philippe Kraenzlin Silvio Schumacher Silvio Schumacher Basil Guggenheim, Sébastien Philippe Kraenzlin and Silvio Schumacher 2011 SNB Working Papers 2011-05 E40 E42 E44 http://www.snb.ch/n/mmr/reference/working_paper_2011_04/source/working_paper_2011_04.n.pdf Using 10 years of high-frequency foreign exchange data, we present evidence of time-of-day effects in foreign exchange returns through a significant tendency for currencies to depreciate during local trading hours. We confirm this pattern across a range of currencies and find that, in the case of EUR/USD, it can form a simple, profitable trading strategy. We also find that this pattern is present in order flow and suggest that both patterns relate to the tendency of market participants to be net purchasers of foreign exchange in their own trading hours. Data from alternative sources appear to corroborate that interpretation. 2011-06-26T22:11:04+01:00 en Intraday patterns in FX returns and order flow Intraday patterns in FX returns and order flow 2011-06-26T22:11:04+01:00 Foreign Exchange Microstructure Order Flow Liquidity Intraday patterns in FX returns and order flow http://www.snb.ch/n/mmr/reference/working_paper_2011_04/source/working_paper_2011_04.n.pdf PDF version Francis Breedon Francis Breedon Angelo Ranaldo Angelo Ranaldo Francis Breedon and Angelo Ranaldo 2011 SNB Working Papers 2011-04 G15 http://www.snb.ch/n/mmr/reference/working_paper_2011_03/source/working_paper_2011_03.n.pdf The decomposition of the market return into its cash-flow and discount-rate news driven components reveals that excess returns on low forward discount currency portfolios load positively on "good" news about the stock market's discount rates while high forward discount currencies load negatively on this news. Average currency portfolio returns are hence explained by different sensitivities to discount-rate news. A two-beta version of the CAPM, distinguishing between cash-flow and discount-rate betas, is able to price both currency and stock portfolio returns at the same time. Finally, we find that the relation between stock market news and foreign currency returns varies across the two either discount-rate news or both discount-rate and cash-flow news driven stock market booms of the past two decades. 2011-06-26T22:11:03+01:00 en Foreign currency returns and systematic risks Foreign currency returns and systematic risks 2011-06-26T22:11:03+01:00 Currency returns cash-flow news discount-rate news market return UIP Foreign currency returns and systematic risks http://www.snb.ch/n/mmr/reference/working_paper_2011_03/source/working_paper_2011_03.n.pdf PDF version Victoria Galsband Victoria Galsband Thomas Nitschka Thomas Nitschka Victoria Galsband and Thomas Nitschka 2011 SNB Working Papers 2011-03 F31 F37 G15 http://www.snb.ch/n/mmr/reference/working_paper_2011_02/source/working_paper_2011_02.n.pdf Motivated by concerns over foreign currency exposures of banks in Emerging Europe, we examine the currency denomination of business loans made in Bulgaria during the period 2003-2007. We analyze a unique dataset including information on the requested and granted currency for more than hundred thousand loans granted by one bank to sixty thousand different firms. This data set allows us to disentangle demand-side from supply-side determinants of foreign currency loans. We find that 32% of the foreign currency loans disbursed in our sample were actually requested in local currency by the firm. Our analysis suggests that the bank lends in foreign currency, not only to less risky firms, but also when the firm requests a long-term loan and when the bank itself has more funding in euro. These results imply that foreign currency borrowing in Eastern Europe is not only driven by borrowers who try to benefit from lower interest rates but also by banks hesitant to lend longterm in local currency and eager to match the currency structure of their assets and liabilities. 2011-06-26T22:11:02+01:00 en Foreign Currency Loans - Demand or Supply Driven? Foreign Currency Loans - Demand or Supply Driven? 2011-06-26T22:11:02+01:00 foreign currency debt banking Foreign Currency Loans - Demand or Supply Driven? http://www.snb.ch/n/mmr/reference/working_paper_2011_02/source/working_paper_2011_02.n.pdf PDF version Martin Brown Martin Brown Karolin Kirschenmann Karolin Kirschenmann Steven Ongena Steven Ongena Martin Brown, Karolin Kirschenmann and Steven Ongena 2011 SNB Working Papers 2011-02 G21 G30 F34 F37 http://www.snb.ch/n/mmr/reference/working_paper_2011_01/source/working_paper_2011_01.n.pdf This paper uses survey data for 29,000 households from 29 transition economies to explore how the use of banking services is related to household characteristics, bank ownership structure and the development of the financial infrastructure. At the household level we find that the holding of a bank account or bank card increases with income, wealth and education in most countries and also find evidence for an urban-rural gap, as well as for a role of religion and social integration. Our results show that foreign bank ownership is associated with more bank accounts among high-wealth, high-income, and educated households. State ownership, on the other hand, does not induce financial inclusion of rural and poorer households. We find that higher deposit insurance coverage, better payment systems and creditor protection encourage the holding of bank accounts in particular by highincome and high-wealth households. All in all, our findings shed doubt on the ability of policy levers to broaden the financial system to disadvantaged groups. 2011-06-26T22:11:01+01:00 en Which Households Use Banks? Evidence from the Transition Economies Which Households Use Banks? Evidence from the Transition Economies 2011-06-26T22:11:01+01:00 Access to finance Bank-ownership Deposit insurance Payment system Creditor protection. Which Households Use Banks? Evidence from the Transition Economies http://www.snb.ch/n/mmr/reference/working_paper_2011_01/source/working_paper_2011_01.n.pdf PDF version Thorsten Beck Thorsten Beck Martin Brown Martin Brown Thorsten Beck and Martin Brown 2011 SNB Working Papers 2011-01 G2 G18 O16 P34 http://www.snb.ch/n/mmr/reference/working_paper_2010_19/source/working_paper_2010_19.n.pdf We study the dynamic general equilibrium of an economy where risk averse shareholders delegate the management of the firm to risk averse managers. The optimal contract has two main components: an incentive component corresponding to a non-tradable equity position and a variable "salary" component indexed to the aggregate wage bill and to aggregate dividends. Tying a manager's compensation to the performance of her own firm ensures that her interests are aligned with the goals of firm owners and that maximizing the discounted sum of future dividends will be her objective. Linking managers' compensation to overall economic performance is also required to make sure that managers use the appropriate stochastic discount factor to value those future dividends. General equilibrium considerations thus provide a potential resolution of the "pay for luck" puzzle. We also demonstrate that one sided "relative performance evaluation" follows equally naturally when managers and shareholders are differentially risk averse. 2011-06-26T22:10:19+01:00 en Executive Compensation: A General Equilibrium Perspective Executive Compensation: A General Equilibrium Perspective 2011-06-26T22:10:19+01:00 incentives optimal contracting stochastic discount factor pay-for-luck relative performance Executive Compensation: A General Equilibrium Perspective http://www.snb.ch/n/mmr/reference/working_paper_2010_19/source/working_paper_2010_19.n.pdf PDF version Jean-Pierre Danthine Jean-Pierre Danthine John B. Donaldson John B. Donaldson Jean-Pierre Danthine and John B. Donaldson 2010 SNB Working Papers 2010-19 E32 E44 http://www.snb.ch/n/mmr/reference/working_paper_2010_18/source/working_paper_2010_18.n.pdf This paper starts by documenting that during the last decades, the human capital embodied in imports from skill abundant nations has noticeably reduced skill accumulation in the less developed world. To identify the causal relation between these variables, the analysis utilizes over-time variation in the supply of skilled labor and the extent to which this variation affects the skill content of trade given the bilateral distance between im- and exporter. In a panel estimation covering 41 non-OCED members, a one standard deviation higher geographic pressure to import human capital is associated with a 12% reduction in the national average length of schooling. The paper next develops a model to analyze the income and welfare consequences of such trade-induced human capital disaccumulation. The model is based on heterogeneous workers who make educational decisions in the presence of complete markets. When heterogeneous workers invest in schooling, high type agents earn a surplus from their investment. Trade shifts this surplus to rich countries that can use skills more efficiently. Consequently, the dynamic effects of liberalization tend to occur to initially rich countries, thus leading to divergence. 2011-06-26T22:10:18+01:00 en Are Imports from Rich Nations Deskilling Emerging Economies? - Human Capital and the Dynamic Effects of Trade Are Imports from Rich Nations Deskilling Emerging Economies? - Human Capital and the Dynamic Effects of Trade 2011-06-26T22:10:18+01:00 Factor Content of Trade Employment Human Capital Economic Growth Are Imports from Rich Nations Deskilling Emerging Economies? - Human Capital and the Dynamic Effects of Trade http://www.snb.ch/n/mmr/reference/working_paper_2010_18/source/working_paper_2010_18.n.pdf PDF version Raphael Anton Auer Raphael Anton Auer Raphael Anton Auer 2010 SNB Working Papers 2010-18 F11 F14 F16 http://www.snb.ch/n/mmr/reference/working_paper_2010_17/source/working_paper_2010_17.n.pdf Do immigrants have a higher demand for large denominated banknotes than natives? This micro study examines whether cash orders for CHF 1,000 notes, a banknote used for storage purposes, is concentrated in Swiss municipalities with a high foreign-to-native ratio. Controlling for a range of regional indicators across 251 Swiss municipalities, European immigrants in Switzerland are found to hoard less CHF 1,000 banknotes than natives. This result says that immigration reduces seigniorage (per person) as measured by currency orders. A 1% increase in the immigrant-to-native ratio is coincident with a reduction in currency orders by CHF 4,000. The dampening effect is attributed to specific traits linked to immigrants. 2011-06-26T22:10:17+01:00 en Immigration and large banknotes Immigration and large banknotes 2011-06-26T22:10:17+01:00 immigration large banknotes hoarding money demand Immigration and large banknotes http://www.snb.ch/n/mmr/reference/working_paper_2010_17/source/working_paper_2010_17.n.pdf PDF version Andreas M. Fischer Andreas M. Fischer Andreas M. Fischer 2010 SNB Working Papers 2010-17 E41 E69 http://www.snb.ch/n/mmr/reference/working_paper_2010_16/source/working_paper_2010_16.n.pdf This study examines the behavior of Swiss house prices to immigration flows for 85 districts from 2001 to 2006. The results show that the nexus between immigration and house prices holds even in an environment of low house price inflation, nationwide rent control, and modest immigration flows. An immigration inflow equal to 1% of an area's population is coincident with an increase in prices for single-family homes of about 2.7%: a result consistent with previous studies. The overall immigration effect for single-family houses captures almost two-thirds of the total price increase. 2011-06-26T22:10:16+01:00 en Immigration and Swiss House Prices Immigration and Swiss House Prices 2011-06-26T22:10:16+01:00 Immigration Housing Prices Immigration and Swiss House Prices http://www.snb.ch/n/mmr/reference/working_paper_2010_16/source/working_paper_2010_16.n.pdf PDF version Kathrin Degen Kathrin Degen Andreas M. Fischer Andreas M. Fischer Kathrin Degen and Andreas M. Fischer 2010 SNB Working Papers 2010-16 F22 J61 R21 http://www.snb.ch/n/mmr/reference/working_paper_2010_15/source/working_paper_2010_15.n.pdf How should monetary authorities react to an oil price shock? The New Keynesian literature has concluded that ensuring perfect price stability is optimal. Yet, the contrast between theory and practice is striking: Inflation targeting central banks typically favor a longer run approach to price stability. The first contribution of this paper is to show that because oil cost shares vary with oil prices, policies that perfectly stabilize prices entail large welfare costs, which explains the reluctance of policymakers to enforce them. The policy trade-off faced by monetary authorities is meaningful because oil (energy) is an input to both production and consumption. Welfare-based optimal policies rely on unobservables, which makes them hard to implement and communicate. The second contribution of this paper is thus to analytically derive a simple interest rate rule that mimics the optimal plan in all dimensions but that only depends on observables: core inflation and the growth rates of output and oil prices. It turns out that optimal policy is hard on core inflation but cushions the economy against the real consequences of an oil price shock by reacting strongly to output growth and negatively to oil price changes. Following a Taylor rule or perfectly stabilizing prices during an oil price shock are very costly alternatives. 2011-06-26T22:10:15+01:00 en Monerary Policy Response to Oil Price Shocks Monerary Policy Response to Oil Price Shocks 2011-06-26T22:10:15+01:00 optimal monetary policy oil shocks divine coincidence simple rules Monerary Policy Response to Oil Price Shocks http://www.snb.ch/n/mmr/reference/working_paper_2010_15/source/working_paper_2010_15.n.pdf PDF version Jean-Marc Natal Jean-Marc Natal Jean-Marc Natal 2010 SNB Working Papers 2010-15 E32 E52 E58 http://www.snb.ch/n/mmr/reference/working_paper_2010_14/source/working_paper_2010_14.n.pdf Arbitrage normally ensures that covered interest parity (CIP) holds. Until recently, excess profits, if any, were documented to last merely seconds and reach a few pips. Instead, this paper finds that following the Lehman bankruptcy, these were large, persisted for months and involved strategies short in dollars. Profits are estimated by specifying the arbitrage strategy as a speculator would actually implement it, considering both unsecured and secured funding. Either way, it seems that dollar funding constraints kept traders from arbitraging away excess profits. The claim finds support in an empirical analysis drawing on several novel high frequency datasets of synchronous quotes across securities, including transaction costs. 2011-06-26T22:10:14+01:00 en Limits to arbitrage during the crisis: funding liquidity constraints and covered interest parity Limits to arbitrage during the crisis: funding liquidity constraints and covered interest parity 2011-06-26T22:10:14+01:00 arbitrage limits covered interest parity funding liquidity financial crisis Limits to arbitrage during the crisis: funding liquidity constraints and covered interest parity http://www.snb.ch/n/mmr/reference/working_paper_2010_14/source/working_paper_2010_14.n.pdf PDF version Tommaso Mancini Griffoli Tommaso Mancini Griffoli Angelo Ranaldo Angelo Ranaldo Tommaso Mancini Griffoli and Angelo Ranaldo 2010 SNB Working Papers 2010-14 F31 G01 G14 http://www.snb.ch/n/mmr/reference/working_paper_2010_13/source/working_paper_2010_13.n.pdf While it is well established that across-country taste differences are associated with "home market effects", there is very limited analysis of how such preference heterogeneity impacts the aggregate volume of trade and the welfare gains from liberalization. I develop a structural model of aggregate demand featuring products with heterogeneous attributes, consumers with heterogeneous tastes for attributes, and across-country differences in the distribution of tastes. The impact of across-country taste differences depends on whether the domestic industry can adjust to the mismatch between the attribute composition of imports and the domestic distribution of tastes. For the case of a large degree of across-country taste differences, countries specialize completely and the model supports notions along the lines of Linder (1961) that taste diversity impedes the volume of trade and leads to group-specific gains from trade. In contrast, if specialization is incomplete, free firm entry implies that the relative toughness of competition across different market segments must be invariant to liberalization. It is shown that therefore, both trade volume and welfare gains are entirely unaffected by the distribution of foreign tastes and coincide with those in a representative agent framework. 2011-06-26T22:10:13+01:00 en Consumer Heterogeneity and the Impact of Trade Liberalization: How Representative is the Representative Agent Framework? Consumer Heterogeneity and the Impact of Trade Liberalization: How Representative is the Representative Agent Framework? 2011-06-26T22:10:13+01:00 Intra-Industry Trade Monopolistic Competition Heterogeneous Agents Industrial Structure Firm Dynamics Consumer Heterogeneity and the Impact of Trade Liberalization: How Representative is the Representative Agent Framework? http://www.snb.ch/n/mmr/reference/working_paper_2010_13/source/working_paper_2010_13.n.pdf PDF version Raphael Anton Auer Raphael Anton Auer Raphael Anton Auer 2010 SNB Working Papers 2010-13 F12 F15 L15 L16 http://www.snb.ch/n/mmr/reference/working_paper_2010_12/source/working_paper_2010_12.n.pdf During the financial crisis of 2007/08 the level and volatility of interest rate spreads increased dramatically. This paper examines how the choice of the target interest rate for monetary policy affects the volatility of inflation, the output gap and the yield curve. We consider three monetary policy operating procedures with different target interest rates: two market rates with maturities of one and three months, respectively, and an essentially riskless one-month repo rate. The implementation tool is the one-month repo rate for all three operating procedures. In a highly stylised model, we find that using a money market rate as a target rate generally yields lower variability of the macroeconomic variables. This holds under discretion as well as under commitment both in times of financial calm or turmoil. Whether the one month or three month rate procedure performs best depends on the maturity of the specific rate that enters the IS curve. 2011-06-26T22:10:12+01:00 en Macroeconomic and interest rate volatility under alternative monetary operating procedures Macroeconomic and interest rate volatility under alternative monetary operating procedures 2011-06-26T22:10:12+01:00 Optimal monetary policy rules monetary operating procedures yield curve Macroeconomic and interest rate volatility under alternative monetary operating procedures http://www.snb.ch/n/mmr/reference/working_paper_2010_12/source/working_paper_2010_12.n.pdf PDF version Petra Gerlach-Kristen Petra Gerlach-Kristen Barbara Rudolf Barbara Rudolf Petra Gerlach-Kristen and Barbara Rudolf 2010 SNB Working Papers 2010-12 E43 E52 E58 http://www.snb.ch/n/mmr/reference/working_paper_2010_11/source/working_paper_2010_11.n.pdf Momentum in foreign stock market returns is exploitable as signal of currency excess returns. Past stock market winner currencies offer higher returns than past stock market loser currencies. This finding is unrelated to interest rate differentials. Funding liquidity risk explains the time series variation in foreign stock market momentum sorted currency portfolio returns. Their cross-sectional dispersion is hardly rationalized by systematic risk factors in contrast to forward discount and currency momentum sorted currency portfolios. This latter finding reflects that fundamentals driving stock market momentum based currency portfolio returns are not related to recently proposed currency risk factors in the cross-section. 2011-06-26T22:10:11+01:00 en Momentum in stock market returns: Implications ofr risk premia on foreign currencies Momentum in stock market returns: Implications ofr risk premia on foreign currencies 2011-06-26T22:10:11+01:00 currency returns expected return news intrinsic value momentum risk premia stock market returns Momentum in stock market returns: Implications ofr risk premia on foreign currencies http://www.snb.ch/n/mmr/reference/working_paper_2010_11/source/working_paper_2010_11.n.pdf PDF version Thomas Nitschka Thomas Nitschka Thomas Nitschka 2010 SNB Working Papers 2010-11 F31 F37 G15 http://www.snb.ch/n/mmr/reference/working_paper_2010_10/source/working_paper_2010_10.n.pdf We develop a reciprocity-based model of wage determination and incorporate it into a modern dynamic general equilibrium framework. We estimate the model and find that, among potential determinants of wages, rent-sharing (between workers and firms) and wage entitlement (based on wages earned in the past) are important to fit the dynamic responses of output, wages and inflation to various exogenous shocks. Aggregate employment conditions (measuring workers' outside option), on the other hand, are found to play only a negligible role for wage setting. These results are broadly consistent with micro-studies on reciprocity in labor relations but contrast with traditional efficiency wage models which emphasize aggregate labor market variables as the main determinant of wage setting. 2011-06-26T22:10:10+01:00 en The Business Cycle Implications of Reciprocity in Labor Relations The Business Cycle Implications of Reciprocity in Labor Relations 2011-06-26T22:10:10+01:00 Efficiency Wages Reciprocity Estimated DSGE Models The Business Cycle Implications of Reciprocity in Labor Relations http://www.snb.ch/n/mmr/reference/working_paper_2010_10/source/working_paper_2010_10.n.pdf PDF version Jean-Pierre Danthine Jean-Pierre Danthine André Kurmann André Kurmann Jean-Pierre Danthine and André Kurmann 2010 SNB Working Papers 2010-10 E24 E31 E32 E52 J50 http://www.snb.ch/n/mmr/reference/working_paper_2010_09/source/working_paper_2010_09.n.pdf Based on survey data covering 8,387 firms in 20 countries we compare credit demand and credit supply for firms in Eastern Europe to those for firms in selected Western European countries. We find that, while 30% of firms do not need credit in Eastern Europe, their need for credit is higher than in Western Europe. The firm-level determinants of credit needs in Eastern Europe are quite similar to that in Western Europe: Firms with alternative financings sources, i.e. government-owned, foreign-owned and internally financed firms, are less likely to need credit. Small firms are also less likely to demand credit than larger firms, suggesting that they may have limited investment opportunities. We find that a higher share of firms is discouraged from applying for a loan in Eastern Europe than in Western Europe. Firms in Eastern Europe seem particularly discouraged by high interest rates compared to firms in Western Europe, with collateral conditions and loan application procedures also more discouraging. The higher rate of discouraged firms in Eastern Europe is related to a stronger reluctance of small and financially opaque firms to apply for a loan compared to Western Europe. While many discouraged firms correctly anticipate that their loan applications would be rejected, a large majority of discouraged firms seem to be creditworthy. At the country-level we find that the higher rate of discouraged firms in Eastern Europe is driven more by the presence of foreign banks than by the macroeconomic environment or the lack of creditor protection. We find no evidence that foreign bank presence leads to stricter loan approval decisions. Our findings suggest to policy makers that the low incidence of bank credit among firms in Eastern Europe, compared to Western Europe, is not driven by less need for credit or banks' reluctance to extend loans. The main driver seems to be that many (creditworthy) firms are discouraged from applying for a loan, due to high interest rates, collateral conditions and cumbersome lending procedures. As discouragement is particularly high among small and opaque firms, as well as in countries with a strong presence of foreign banks, it seems that firms perceive lending standards to have become more reliant on "hard information" with the entry of foreign banks. However, as loan rejection rates are not related to foreign bank presence, it seems that firms' perceptions of the likely lending conditions may be too pessimistic. Thus more transparency about credit eligibility and conditions may improve credit access, particularly in countries with a high presence of foreign banks. 2011-06-26T22:10:09+01:00 en Who Needs Credit and Who Gets Credit in Eastern Europe? Who Needs Credit and Who Gets Credit in Eastern Europe? 2011-06-26T22:10:09+01:00 Banking Credit Transition economies Who Needs Credit and Who Gets Credit in Eastern Europe? http://www.snb.ch/n/mmr/reference/working_paper_2010_09/source/working_paper_2010_09.n.pdf PDF version Martin Brown Martin Brown Steven Ongena Steven Ongena Alexander Popov Alexander Popov Pinar Yesin Pinar Yesin Martin Brown, Steven Ongena, Alexander Popov and Pinar Yesin 2010 SNB Working Papers 2010-09 G21 O16 http://www.snb.ch/n/mmr/reference/working_paper_2010_08/source/working_paper_2010_08.n.pdf This paper analyses the development of housing market imbalances, housing prices and residential investment in Switzerland within a stock-flow framework. In the long run, the desired level of residential capital stock and the existing residential capital stock revert. Empirical results indicate, however, that housing demand can diverge from the existing supply for several years due to the slow adjustment of the residential capital stock to shocks. In the short run, the market therefore has to be cleared by price adjustments. And indeed, it can be shown empirically that changes in prices are significantly and strongly dependent on the level of stock imbalances. Furthermore, housing prices prove to be an important determinant of residential investment, which in turn drives the adjustment process of the residential capital stock towards its desired level. 2011-06-26T22:10:08+01:00 en Estimating a stock-flow model for the Swiss housing market Estimating a stock-flow model for the Swiss housing market 2011-06-26T22:10:08+01:00 Housing Demand Housing Supply Residential Investment Market disequilibrium Housing prices Estimating a stock-flow model for the Swiss housing market http://www.snb.ch/n/mmr/reference/working_paper_2010_08/source/working_paper_2010_08.n.pdf PDF version Elizabeth Steiner Elizabeth Steiner Elizabeth Steiner 2010 SNB Working Papers 2010-08 C32 E22 E32 R21 R31 http://www.snb.ch/n/mmr/reference/working_paper_2010_07/source/working_paper_2010_07.n.pdf An increasing number of oil market experts argue that OPEC members substantially overstate their oil reserves. While the economic implications could be dire, the incentives for overreporting remain unclear. This paper analyzes these incentives, showing that oil exporters may overreport to raise expected future supply, thereby discouraging oil-substituting R&D and improving their own future market conditions. In general, however, overreporting is not costless: it must be backed by observable actions and therefore induces losses through supply distortions. Surprisingly, these distortions offset others that arise when suppliers internalize the buyers' motives for R&D. In this case, overreporting is rational, credible, and cheap. 2011-06-26T22:10:07+01:00 en Overreporting Oil Reserves Overreporting Oil Reserves 2011-06-26T22:10:07+01:00 Exhaustible Resource Substitution Technology Signaling Overreporting Oil Reserves http://www.snb.ch/n/mmr/reference/working_paper_2010_07/source/working_paper_2010_07.n.pdf PDF version Philip Sauré Philip Sauré Philip Sauré 2010 SNB Working Papers 2010-07 F10 F16 D82 http://www.snb.ch/n/mmr/reference/working_paper_2010_06/source/working_paper_2010_06.n.pdf Based on real-time trade data from the Swiss franc overnight interbank repo market and SIX Interbank Clearing (SIC) - the Swiss real-time gross settlement (RTGS) system - we are able to gain valuable insights on the daytime value of money and its determinants: First, an implicit hourly interbank interest rate can be derived from the intraday term structure of the overnight rate. We thereby provide evidence that an implicit intraday money market exists. Second, we show that after the introduction of the foreign exchange settlement system CLS the value of intraday liquidity has increased during the hours of the CLS settlement cycle. Third, the turnover as well as the liquidity in SIC influence the intraday rate correspondingly. These facts provide evidence for the cost of immediacy. Features like RTGS, delivery-versus-payment and payment-versus-payment substitute credit risk with liquidity risk which in turn increases the value of intraday liquidity. The analysis is central bank policy relevant insofar as different designs of intraday liquidity facilities and different collateral policies result in different intraday term structures for the overnight money market. 2011-06-26T22:10:06+01:00 en Daytime is money Daytime is money 2011-06-26T22:10:06+01:00 interbank money market intraday credit term structure Daytime is money http://www.snb.ch/n/mmr/reference/working_paper_2010_06/source/working_paper_2010_06.n.pdf PDF version Sébastien Kraenzlin Sébastien Kraenzlin Thomas Nellen Thomas Nellen Sébastien Kraenzlin and Thomas Nellen 2010 SNB Working Papers 2010-06 E58 G21 G28 http://www.snb.ch/n/mmr/reference/working_paper_2010_05/source/working_paper_2010_05.n.pdf This article studies the relationship between the degree of banking sector stability and the subsequent evolution of real output growth and inflation. Adopting a panel VAR methodology for a sample of 18 OECD countries, we find a positive link between banking sector stability and real output growth. This finding is predominantly driven by periods of instability rather than by very stable periods. In addition, we show that an unstable banking sector increases uncertainty about future output growth. No clear link between banking sector stability and inflation seems to exist. We then argue that the link between banking stability and real output growth can be used to improve output growth forecasts. Using Fed forecast errors, we show that banking sector stability (instability) results in a significant underestimation (overestimation) of GDP growth in the subsequent quarters. 2011-06-26T22:10:05+01:00 en The Impact of Banking Sector Stability on the Real Economy The Impact of Banking Sector Stability on the Real Economy 2011-06-26T22:10:05+01:00 Banking sector stability real output growth output growth forecasts The Impact of Banking Sector Stability on the Real Economy http://www.snb.ch/n/mmr/reference/working_paper_2010_05/source/working_paper_2010_05.n.pdf PDF version Pierre Monnin Pierre Monnin Terhi Jokipii Terhi Jokipii Pierre Monnin and Terhi Jokipii 2010 SNB Working Papers 2010-05 E20 E44 G21 http://www.snb.ch/n/mmr/reference/working_paper_2010_04/source/working_paper_2010_04.n.pdf We develop a macroeconomic framework where money is supplied against only few eligible securities in open market operations. The relationship between the policy rate, expected inflation and consumption growth is affected by money market conditions, i.e. the varying liquidity value of eligible assets and the associated risk. This induces a liquidity premium, which explains the observed systematic wedge between the policy rate and consumption Euler interest rate that standard models equate. It further implies a dampened response of consumption to policy rate shocks that is humpshaped when we account for realistic central bank transfers and the dynamics of bond holdings. 2011-06-26T22:10:04+01:00 en Modeling Monetary Policy Modeling Monetary Policy 2011-06-26T22:10:04+01:00 Monetary Policy Open market operations Liquiditypremium Money market rate Consumption Eulerrate Monetary policy transmission Modeling Monetary Policy http://www.snb.ch/n/mmr/reference/working_paper_2010_04/source/working_paper_2010_04.n.pdf PDF version Samuel Reynard Samuel Reynard Andreas Schabert Andreas Schabert Samuel Reynard and Andreas Schabert 2010 SNB Working Papers 2010-04 E52 E58 E43 E32 http://www.snb.ch/n/mmr/reference/working_paper_2010_03/source/working_paper_2010_03.n.pdf This paper develops a liquidity measure tailored to the foreign exchange (FX) market, quantifies the amount of commonality in liquidity across exchange rates, and determines the extent of liquidity risk premiums embedded in FX returns. The new liquidity measure utilizes ultra high frequency data and captures cross-sectional and temporal variation in FX liquidity during the financial crisis of 2007-2008. Empirical results show that liquidity co-moves across currency pairs and that systematic FX liquidity decreases dramatically during the crisis. Extending an asset pricing model for FX returns by the novel liquidity risk factor suggests that liquidity risk is heavily priced. 2011-06-26T22:10:03+01:00 en Liquidity in the Foreign Exchange Market: Measurement, Commonality, and Risk Premiums Liquidity in the Foreign Exchange Market: Measurement, Commonality, and Risk Premiums 2011-06-26T22:10:03+01:00 Foreign Exchange Market Measuring Liquidity Commonality in LiquidityLiquidity Risk Premium Subprime Crisis Liquidity in the Foreign Exchange Market: Measurement, Commonality, and Risk Premiums http://www.snb.ch/n/mmr/reference/working_paper_2010_03/source/working_paper_2010_03.n.pdf PDF version Loriano Mancini Loriano Mancini Angelo Ranaldo Angelo Ranaldo Jan Wrampelmeyer Jan Wrampelmeyer Loriano Mancini, Angelo Ranaldo and Jan Wrampelmeyer 2010 SNB Working Papers 2010-03 F31 G01 G12 G15 http://www.snb.ch/n/mmr/reference/working_paper_2010_02/source/working_paper_2010_02.n.pdf While price-setting models usually suggest constant or increasing hazard functions for price changes, empirical studies often find decreasing hazards, possibly due to misspecified or neglected heterogeneity. This paper attempts to disentangle the downward bias into various sources: observed and unobserved heterogeneity which can be either constant or time-varying. Based on micro data from the Swiss CPI, the paper finds that in order to resolve the downward bias of the hazard function for price changes, we have to (i) control for time-varying heterogeneity in addition to cross-sectional factors and (ii) exclude temporary price changes such as sales prices from the data set. Among the time-varying factors affecting the probability of price changes, various proxies of firms' marginal costs seem to be key. The empirical findings presented in this paper are consistent with recent menu cost models which stress the role of time-varying heterogeneity and temporary price cuts for price setting. 2011-06-26T22:10:02+01:00 en The Timing of Price Changes and the Role of Heterogeneity The Timing of Price Changes and the Role of Heterogeneity 2011-06-26T22:10:02+01:00 price setting hazard function downward bias heterogeneity sales prices state-dependent pricing The Timing of Price Changes and the Role of Heterogeneity http://www.snb.ch/n/mmr/reference/working_paper_2010_02/source/working_paper_2010_02.n.pdf PDF version Daniel Kaufmann Daniel Kaufmann Daniel Kaufmann 2010 SNB Working Papers 2010-02 E31 D40 C41 http://www.snb.ch/n/mmr/reference/working_paper_2010_01/source/working_paper_2010_01.n.pdf We explain the currency carry trade performance using an asset pricing model in which factor loadings are regime-dependent rather than constant. Empirical results show that a typical carry trade strategy has much higher exposure to the stock market and is mean-reverting in regimes of high FX volatility. The findings are robust to various extensions, including more currencies, longer samples, transaction costs, international stock indices, and other proxies for volatility and liquidity. Our regime-dependent pricing model provides significantly smaller pricing errors than a traditional model. Thus, the carry trade performance is better explained by its time-varying systematic risk that magnifies in volatile markets-suggesting a partial explanation for the Uncovered Interest Rate Parity puzzle. 2011-06-26T22:10:01+01:00 en The Time-Varying Systematic Risk of Carry Trade Strategies The Time-Varying Systematic Risk of Carry Trade Strategies 2011-06-26T22:10:01+01:00 carry trade factor model FX volatility liquidity smooth transition regression time-varying betas The Time-Varying Systematic Risk of Carry Trade Strategies http://www.snb.ch/n/mmr/reference/working_paper_2010_01/source/working_paper_2010_01.n.pdf PDF version Charlotte Christiansen Charlotte Christiansen Angelo Ranaldo Angelo Ranaldo Paul Söderlind Paul Söderlind Charlotte Christiansen, Angelo Ranaldo and Paul Söderlind 2010 SNB Working Papers 2010-01 F31 G15 G11 http://www.snb.ch/n/mmr/reference/working_paper_2009_16/source/working_paper_2009_16.n.pdf This paper looks into the determinants of the Swiss franc exchange rate against the euro. Based on the monetary approach to exchange rates, we start from the premise that monetary policy has an influence on the exchange rate. To measure this effect, we apply the structural vector-autoregression methodology on a set of Swiss macroeconomic variables and the euro area interest rate. Overall, we find that Swiss monetary policy contributes between 7 and 15% to variations of the exchange rate between 1981 and 2008. Focusing on the episode between 2003 and 2005 we attribute more than half of the depreciation of the franc to Swiss monetary policy. 2011-06-26T22:09:16+01:00 en Monetary determinants of the Swiss franc Monetary determinants of the Swiss franc 2011-06-26T22:09:16+01:00 exchange rates monetary policy structural VAR models Monetary determinants of the Swiss franc http://www.snb.ch/n/mmr/reference/working_paper_2009_16/source/working_paper_2009_16.n.pdf PDF version Carlos Lenz Carlos Lenz Marcel Savioz Marcel Savioz Carlos Lenz and Marcel Savioz 2009 SNB Working Papers 2009-16 E52 F31 C32 http://www.snb.ch/n/mmr/reference/working_paper_2009_15/source/working_paper_2009_15.n.pdf The implementation of monetary policy is prevalently done by interest rate targeting with a short term market rate serving as operational target. The instruments for achieving the operational target are the provision of reserves and the interest rate charged in these transactions. This paper presents a model for the estimation of the demand curve for reserves, derived from the central bank's fixed rate tender auction and the interbank money market. Using data from Switzerland, the slope of the demand curve is estimated. Furthermore, properties of the demand curve such as the slope patterns in the course of a maintenance period and the slope in different monetary regimes are assessed. We find a steeper demand curve towards the end of the maintenance period and an increasing slope when the general interest rate level is high. Further, we investigate the role of the Swiss National Bank's (SNB) interest rate in the fixed rate tender auctions. There is evidence that the SNB uses its auction rate to guide the interbank market rate. 2011-06-26T22:09:15+01:00 en Demand for Reserves and the Central Bank's Management of Interest Rates Demand for Reserves and the Central Bank's Management of Interest Rates 2011-06-26T22:09:15+01:00 Implementation of Monetary Policy Money Demand Fixed Rate TenderAuction Repo Switzerland Demand for Reserves and the Central Bank's Management of Interest Rates http://www.snb.ch/n/mmr/reference/working_paper_2009_15/source/working_paper_2009_15.n.pdf PDF version Martin Schlegel Martin Schlegel Sébastien Kraenzlin Sébastien Kraenzlin Martin Schlegel and Sébastien Kraenzlin 2009 SNB Working Papers 2009-15 D40 E41 E43 E52 http://www.snb.ch/n/mmr/reference/working_paper_2009_14/source/working_paper_2009_14.n.pdf The Swiss National Bank (SNB) provides reserves to market participants via fixed rate tender auctions. We analyze the banks' bidding behavior and identify the determinants for the decision to participate as well as on the amount to tender. Therefore, we estimate bidding functions for banks which participate regularly in the SNB's auctions. We find that a bank's bids from the previous day and the amount of maturing repo operations with the SNB have for most banks a significant effect. The autonomous factors (government balances at the SNB and currency in circulation) are of only minor importance. A further determinant of the bidding behavior is the attractiveness of the SNB's auction rate compared to the prevailing interbank market repo rate. The spread of unsecured and repo rates as well as the attractiveness of funding Euros indirectly via a Swiss franc repo transaction with the SNB are only for few banks significant. Further, the question is addressed whether the bidding behavior changed in the financial market crisis of 2007/2008. There is little evidence of a systematic change in bidding behavior in the crisis. This results from the fact that the SNB has addressed the volatile demand for reserves in the crisis with overnight fine-tuning operations. 2011-06-26T22:09:14+01:00 en Bidding Behavior in the SNB's Repo Auctions Bidding Behavior in the SNB's Repo Auctions 2011-06-26T22:09:14+01:00 Open Market Operations Bidding Behavior FixedRate Tender Auction Repo Switzerland Bidding Behavior in the SNB's Repo Auctions http://www.snb.ch/n/mmr/reference/working_paper_2009_14/source/working_paper_2009_14.n.pdf PDF version Sébastien Kraenzlin Sébastien Kraenzlin Martin Schlegel Martin Schlegel Sébastien Kraenzlin and Martin Schlegel 2009 SNB Working Papers 2009-14 D44 E52 E58 http://www.snb.ch/n/mmr/reference/working_paper_2009_13/source/working_paper_2009_13.n.pdf In this paper, we analyse the sources of economic growth in Switzerland during the period 1991-2005. The results suggest that labour input and capital input contribute 0.57 pp and 0.45 pp, respectively, to the average annual GDP growth of 1.28%. The remaining 0.25 pp represent growth in multi-factor productivity, which is calculated as a residual. The estimate of growth in multi-factor productivity is lower than in previous studies because our measure of labour input takes changes in labour quality into account. Changes in labour quality explain 0.39 pp of the 0.45 pp contribution from labour input. 2011-06-26T22:09:13+01:00 en Productivity and economic growth in Switzerland 1991-2005 Productivity and economic growth in Switzerland 1991-2005 2011-06-26T22:09:13+01:00 growth accounting multi-factor productivity capital services constant-quality labour Productivity and economic growth in Switzerland 1991-2005 http://www.snb.ch/n/mmr/reference/working_paper_2009_13/source/working_paper_2009_13.n.pdf PDF version Barbara Rudolf Barbara Rudolf Mathias Zurlinden Mathias Zurlinden Barbara Rudolf and Mathias Zurlinden 2009 SNB Working Papers 2009-13 E31 E37 http://www.snb.ch/n/mmr/reference/working_paper_2009_12/source/working_paper_2009_12.n.pdf Male and female labor are imperfect substitutes and some sectors are more suitable for female employment than others. Clearly, expansions of those sectors that use female labor intensively must affect aggregate female labor force participation (FLFP). We suggest that FLFP actually drops when trade and international specialization expand sectors that use female labor intensively. This effect arises because expansions of the former sectors come along with contractions of others. The latter contractions, in turn, induce male workers to move to the expanding sectors, driving female workers out of formal employment. Thus, a country that is exporting female labor content is actually substituting male labor for female. Finally, building on U.S.-Mexican trade data, we provide empirical evidence that support our argument. 2011-06-26T22:09:12+01:00 en Effects of Trade on Female Labor Force Participation Effects of Trade on Female Labor Force Participation 2011-06-26T22:09:12+01:00 Trade Female Labor Force Participation Fertility Technological Change Effects of Trade on Female Labor Force Participation http://www.snb.ch/n/mmr/reference/working_paper_2009_12/source/working_paper_2009_12.n.pdf PDF version Philip Sauré Philip Sauré Hosny Zoabi Hosny Zoabi Philip Sauré and Hosny Zoabi 2009 SNB Working Papers 2009-12 F10 F16 J13 J16 http://www.snb.ch/n/mmr/reference/working_paper_2009_11/source/working_paper_2009_11.n.pdf This paper shows that transparency in banking can be harmful from a social planner's point of view. According to our model, enhancing transparency above a certain level may lead to the inefficient liquidation of a bank. The reason lies in the nature of a standard deposit contract: its payoff scheme has limited upside gains (cap) but leaves the depositor with the downside risk. Accordingly, depositors will not take into account possible future upside gains of the bank when deciding whether or not to withdraw their deposits. Our result points towards a trade-off the regulator faces: while enhancing transparency may be useful to reduce incentives for excessive risk-taking (moral hazard), it may also increase the risk of inefficient bank runs. 2011-06-26T22:09:11+01:00 en Banking and Transparency: Is More Information Always Better? Banking and Transparency: Is More Information Always Better? 2011-06-26T22:09:11+01:00 banking transparency financial stability bank run Banking and Transparency: Is More Information Always Better? http://www.snb.ch/n/mmr/reference/working_paper_2009_11/source/working_paper_2009_11.n.pdf PDF version Nicole Allenspach Nicole Allenspach Nicole Allenspach 2009 SNB Working Papers 2009-11 D82 G21 G28 http://www.snb.ch/n/mmr/reference/working_paper_2009_10/source/working_paper_2009_10.n.pdf Recent trade data exhibit the following four empirical regularities: (i) countries import only a small fraction of all traded varieties (ii) per capita income and the number of imported varieties correlate positively (iii) per capita income and trade shares correlate positively and, finally, (iv) world trade shares have increased substantially. The present paper argues that standard theories fail to explain at least some of these patterns and subsequently shows that a small and reasonable change in the demand structure can reconcile the New Trade model with the data. Its key assumption imposes an upper bound on consumers' marginal utility from varieties. This implies that consumers purchase only the cheaper share of varieties, while expensive foreign varieties bearing high transport costs are not consumed. Technological progress that increases per capita consumption of those varieties in the consumption basket decreases marginal utility derived from them and induces consumers to extend their consumption to more expensive varieties produced at distant locations. Through this additional margin trade shares increase as productivity grows. Productivity growth is thus identified as a joint determinant of trade shares, the number imported varieties, and per capita income. 2011-06-26T22:09:10+01:00 en Bounded Love of Variety and Patterns of Trade Bounded Love of Variety and Patterns of Trade 2011-06-26T22:09:10+01:00 Marginal Utility Variety Bounded Love of Variety and Patterns of Trade http://www.snb.ch/n/mmr/reference/working_paper_2009_10/source/working_paper_2009_10.n.pdf PDF version Philip Sauré Philip Sauré Philip Sauré 2009 SNB Working Papers 2009-10 F10 F13 http://www.snb.ch/n/mmr/reference/working_paper_2009_09/source/working_paper_2009_09.n.pdf Building an unbalanced panel of United States (US) bank holding company (BHC) and commercial bank balance sheet data from 1986 to 2006, we examine the relationship between short-term capital buffer and portfolio risk adjustments. Our estimations indicate that the relationship over the sample period is a positive two-way relationship. Moreover, we show that the management of such adjustments is dependent on the degree of bank capitalization. Further investigation through time-varying analysis reveals a cyclical pattern in the uncovered relationship: negative after the 1991/1992 crisis, and positive before 1991 and after 1997. 2011-06-26T22:09:09+01:00 en Bank Capital Buffer and Risk Adjustment Decisions Bank Capital Buffer and Risk Adjustment Decisions 2011-06-26T22:09:09+01:00 Bank capital Portfolio Risk Regulation Bank Capital Buffer and Risk Adjustment Decisions http://www.snb.ch/n/mmr/reference/working_paper_2009_09/source/working_paper_2009_09.n.pdf PDF version Terhi Jokipii Terhi Jokipii Alistair Milne Alistair Milne Terhi Jokipii and Alistair Milne 2009-10 SNB Working Papers 2009-09 G21 G28 G32 http://www.snb.ch/n/mmr/reference/working_paper_2009_08/source/working_paper_2009_08.n.pdf The willingness of banks to provide funding for real estate purchases depends on the creditworthiness of their borrowers. Beside other factors, the creditworthiness of borrowers depends on the development of real estate prices. Real estate prices, in turn, depend on the demand for homes which is influenced by the willingness of banks to provide funding for real estate purchases. In this paper I develop a theoretical model which describes and explains this circular relationship. Using this model, I show how different kinds of expectation formations can lead to fluctuations of real estate prices. Furthermore, I show that banks make above average profits in the upswing phase of the real estate cycle but suffer high losses when the market turns. 2011-06-26T22:09:08+01:00 en Banks and Real Estate Prices Banks and Real Estate Prices 2011-06-26T22:09:08+01:00 Credit Cycle Real Estate Prices Bubbles Banks and Real Estate Prices http://www.snb.ch/n/mmr/reference/working_paper_2009_08/source/working_paper_2009_08.n.pdf PDF version Christian Hott Christian Hott Christian Hott 2009 SNB Working Papers 2009-08 E51 G12 G21 http://www.snb.ch/n/mmr/reference/working_paper_2009_07/source/working_paper_2009_07.n.pdf In order to protect themselves against the potential losses in case of a participant's default and to contain systemic risk, central counterparties (CCPs) need to maintain sufficient financial resources. Typically, these financial resources consist of margin requirements and contributions to a collective default fund. Based on a stylized model of CCP risk management, this article analyzes the main factors affecting the trade-off between margins and default fund. The optimal balance between these two risk management instruments is found to depend on collateral costs, participants' default probability, and the extent to which margin requirements are associated with risk-mitigating incentives. Given the increasing role of CCPs in financial markets in general and for financial stability in particular, these considerations are not only important for CCPs themselves, but also for financial regulators. 2011-06-26T22:09:07+01:00 en Optimal Central Counterparty Risk Management Optimal Central Counterparty Risk Management 2011-06-26T22:09:07+01:00 Central counterparty margin requirements default fund financial stability incentives Optimal Central Counterparty Risk Management http://www.snb.ch/n/mmr/reference/working_paper_2009_07/source/working_paper_2009_07.n.pdf PDF version Philipp Haene Philipp Haene Andy Sturm Andy Sturm Philipp Haene and Andy Sturm 2009 SNB Working Papers 2009-07 G23 G32 G18 http://www.snb.ch/n/mmr/reference/working_paper_2009_06/source/working_paper_2009_06.n.pdf This paper analyses the interplay of capacity utilisation, capacity constraints, demand constraints and price adjustments, employing a unique firm-level data set for Swiss manufacturing firms. Theoretically, capacity constraints limit the ability of firms to expand production in the short run and lead to increases in prices. Our results show that, on the one hand, price increases are more likely during periods when firms are faced with capacity constraints. Constraints due to the shortage of labour, in particular, lead to price increases. On the other hand, we also find evidence that firms are not reluctant to reduce prices in response to demand constraints. At the macro level, the implied capacity-utilisation Phillips curve has a convex shape during periods of excess demand and a concave shape during periods of excess supply. Our results are robust to the inclusion of proxies for changes in costs and the competitive position of firms. 2011-06-26T22:09:06+01:00 en Capacity Utilisation, Constraintes and Price Adjustments under the Microscope Capacity Utilisation, Constraintes and Price Adjustments under the Microscope 2011-06-26T22:09:06+01:00 price setting capacity utilisation capacity constraints demand constraints non-linear Phillips curve Switzerland Capacity Utilisation, Constraintes and Price Adjustments under the Microscope http://www.snb.ch/n/mmr/reference/working_paper_2009_06/source/working_paper_2009_06.n.pdf PDF version Sarah Marit Lein Sarah Marit Lein Eva Köberl Eva Köberl Sarah Marit Lein and Eva Köberl 2009 SNB Working Papers 2009-06 E31 E32 E52 http://www.snb.ch/n/mmr/reference/economic_studies_2009_06/source/economic_studies_2009_06.n.pdf This paper applies the modelling strategy of Garratt, Lee, Pesaran and Shin (2003) to the estimation of a structural cointegrated VAR model that relates the core macroeconomic variables of the Swiss economy to current and lagged values of a number of key foreign variables. We identify and test a long-run structure between the variables. Moreover, we analyse the dynamic properties of the model using Generalised Impulse Response Functions. In its current form the model can be used to produce forecasts for the endogenous variables either under alternative specifi cations of the marginal model for the exogenous variables, or conditional on some pre-specifi ed path of those variables (for scenario forecasting). In due course the Swiss VECX* model can also be integrated within a Global VAR (GVAR) model where the foreign variables of the model are determined endogenously. 2011-06-26T22:09:06+01:00 en A VECX* model of the Swiss economy A VECX* model of the Swiss economy 2011-06-26T22:09:06+01:00 Long-run structural vector autoregression A VECX* model of the Swiss economy http://www.snb.ch/n/mmr/reference/economic_studies_2009_06/source/economic_studies_2009_06.n.pdf PDF version Katrin Assenmacher-Wesche Katrin Assenmacher-Wesche M. Hashem Pesaran M. Hashem Pesaran Katrin Assenmacher-Wesche and M. Hashem Pesaran 2009 SNB Economic Studies 2009-06 C53 C32 http://www.snb.ch/n/mmr/reference/economic_studies_2009_05/source/economic_studies_2009_05.n.pdf This paper presents a DSGE (dynamic stochastic general equilibrium) model of the Swiss economy used since 2007 in the monetary policy decision process at the Swiss National Bank. In addition to forecasting the likely course of main macro variables under various scenarios for the Swiss economy, the model DSGE-CH serves as a laboratory for studying business cycles and examining the effects of actual and hypothetical monetary policies. The microfounded model DSGE-CH represents Switzerland as a small open economy with optimizing economic agents facing several real and nominal rigidities and exogenous foreign and domestic shocks. The comparison of the model's implications with the real world indicates that DSGE-CH performs well along standard dimensions. It captures the overall stochastic structure of the Swiss economy as represented by the moments of its key macroeconomic variables, furthermore, it has appropriate dynamic properties, as judged by its impulse response functions. Finally, it quite accurately replicates the historical path of major Swiss variables. 2011-06-26T22:09:05+01:00 en A dynamic stochastic general equilibrium model for Switzerland A dynamic stochastic general equilibrium model for Switzerland 2011-06-26T22:09:05+01:00 DSGE forecasting small open economy Switzerland A dynamic stochastic general equilibrium model for Switzerland http://www.snb.ch/n/mmr/reference/economic_studies_2009_05/source/economic_studies_2009_05.n.pdf PDF version Nicolas Alexis Cuche-Curti Nicolas Alexis Cuche-Curti Harris Dellas Harris Dellas Jean-Marc Natal Jean-Marc Natal Nicolas Alexis Cuche-Curti, Harris Dellas and Jean-Marc Natal 2009-10 SNB Economic Studies 2009-05 E27 E52 E58 http://www.snb.ch/n/mmr/reference/working_paper_2009_05/source/working_paper_2009_05.n.pdf A comparison of fundamental house prices with actual prices indicates that house prices fluctuate more than fundamentally justified. This fact is very hard to explain with standard rational agent models. This paper develops a housing market model that allows to examine the price effects of various kinds of agents' expectations. In this framework I we show that the consideration of behavioural aspects like herding behaviour, speculation and momentum trading can help to explain actual house price fluctuations. Following the different approaches, agents overreact to fundamentals and are influenced by past price movements and returns. 2011-06-26T22:09:05+01:00 en Explaining House Price Fluctuations Explaining House Price Fluctuations 2011-06-26T22:09:05+01:00 House Prices Bubbles Investor Behaviour Explaining House Price Fluctuations http://www.snb.ch/n/mmr/reference/working_paper_2009_05/source/working_paper_2009_05.n.pdf PDF version Christian Hott Christian Hott Christian Hott 2009 SNB Working Papers 2009-05 G11 G12 R21 http://www.snb.ch/n/mmr/reference/working_paper_2009_04/source/working_paper_2009_04.n.pdf Nominal and real U.S. interest rates (1997Q1-2008Q2) are combined with inflation expectations from the Survey of Professional Forecasters to calculate time series of risk premia. It is shown that survey data on inflation and output growth uncertainty, as well as a proxy for liquidity premia can explain a large amount of the variation in these risk premia. 2011-06-26T22:09:04+01:00 en Inflation Risk Premia and Survey Evidence on Macroeconomic Uncertainty Inflation Risk Premia and Survey Evidence on Macroeconomic Uncertainty 2011-06-26T22:09:04+01:00 break-even inflation liquidity premium Survey of Professional Forecasters Inflation Risk Premia and Survey Evidence on Macroeconomic Uncertainty http://www.snb.ch/n/mmr/reference/working_paper_2009_04/source/working_paper_2009_04.n.pdf PDF version Paul Söderlind Paul Söderlind Paul Söderlind 2009 SNB Working Papers 2009-04 E27 E47 http://www.snb.ch/n/mmr/reference/working_paper_2009_03/source/working_paper_2009_03.n.pdf In modelling and forecasting volatility, two main trade-offs emerge: mathematical tractability versus economic interpretation and accuracy versus speed. The authors attempt to reconcile, at least partially, both trade-offs. The former trade-off is crucial for many financial applications, including portfolio and risk management. The speed/accuracy trade-off is becoming more and more relevant in an environment of large portfolios, prolonged periods of high volatility (as in the current financial crisis), and the burgeoning phenomenon of algorithmic trading in which computer-based trading rules are automatically implemented. The increased availability of high-frequency data provides new tools for forecasting variances and covariances between assets. However, there is scant literature on forecasting more than one realised volatility. Following Gourieroux, Jasiak and Sufana (Journal of Econometrics, forthcoming), the authors propose a methodology to model and forecast realised covariances without any restriction on the parameters while maintaining economic interpretability. An empirical application based on variance forecasting and risk evaluation of a portfolio of two US treasury bills and two exchange rates is presented. The authors compare their model with several alternative specifications proposed in the literature. Empirical findings suggest that the model can be efficiently used in large portfolios. 2011-06-26T22:09:03+01:00 en Forecasting realized (co)variances with a block structure Wishart autoregressive model Forecasting realized (co)variances with a block structure Wishart autoregressive model 2011-06-26T22:09:03+01:00 Wishart process realized volatility Granger causality volatility spillover Value-at-Risk Forecasting realized (co)variances with a block structure Wishart autoregressive model http://www.snb.ch/n/mmr/reference/working_paper_2009_03/source/working_paper_2009_03.n.pdf PDF version Matteo Bonato Matteo Bonato Massimiliano Caporin Massimiliano Caporin Angelo Ranaldo Angelo Ranaldo Matteo Bonato, Massimiliano Caporin and Angelo Ranaldo 2009 SNB Working Papers 2009-03 C13 C16 C22 C51 C53 http://www.snb.ch/n/mmr/reference/working_paper_2009_02/source/working_paper_2009_02.n.pdf We examine the firm- and country-level determinants of the currency denomination of small business loans. We first 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, and also examines the impact of information asymmetry between banks and firms. When foreign currency funds come at a lower interest rate, all foreign currency earners as well as those local currency earners with high revenues and low distress costs choose foreign currency loans. When the banks have imperfect information on the currency and level of firms revenues, even more local earners switch to foreign currency loans, as they do not bear the full cost of the corresponding credit risk. We then test the implications of our model by using a 2005 survey with responses from 9,655 firms in 26 transition countries. The survey contains details on 3,105 recent bank loans. At the firm level, our findings suggest that firms with foreign currency income and assets are more likely to borrow in a foreign currency. In contrast, firm-level distress costs and financial transparency affect the currency denomination only weakly. At the country level, the interest rate advantages of foreign currency funds and the exchange rate volatility do not explain the foreign currency borrowing in our sample. However, foreign bank presence, weak corporate governance and the absence of capital controls encourage foreign currency borrowing. All in all, we cannot confirm that "carry-trade behavior" is the key driver of foreign currency borrowing by small firms in transition economies. Our results do, however, support the conjecture that banking-sector structures and institutions that aggravate information asymmetries may facilitate foreign currency borrowing. 2011-06-26T22:09:02+01:00 en Foreign Currency Borrowing by Small Firms Foreign Currency Borrowing by Small Firms 2011-06-26T22:09:02+01:00 foreign currency borrowing competition banking sector market structure Foreign Currency Borrowing by Small Firms http://www.snb.ch/n/mmr/reference/working_paper_2009_02/source/working_paper_2009_02.n.pdf PDF version Martin Brown Martin Brown Steven Ongena Steven Ongena Pinar Yesin Pinar Yesin Martin Brown, Steven Ongena and Pinar Yesin 2009 SNB Working Papers 2009-02 G21 G30 F34 F37 http://www.snb.ch/n/mmr/reference/working_paper_2009_01/source/working_paper_2009_01.n.pdf The standard economy-wide indices of labor quality (or human capital) largely ignore the role of unobservable worker characteristics. In this paper, we develop a methodology for identifying the contributions of both observable and unobservable worker characteristics in the presence of the incidental parameter problem. Based on data for Switzerland over the period 1991-2006, we find that a large part of growth in labor quality is caused by shifts in the distribution of unobservable worker characteristics. The overall index differs little from the standard indices, but contributions to growth attributed to education and age are corrected downwards. 2011-06-26T22:09:01+01:00 en Measurement of labor quality growth caused by unobservable characteristics Measurement of labor quality growth caused by unobservable characteristics 2011-06-26T22:09:01+01:00 human capital labor quality Measurement of labor quality growth caused by unobservable characteristics http://www.snb.ch/n/mmr/reference/working_paper_2009_01/source/working_paper_2009_01.n.pdf PDF version Thomas Bolli Thomas Bolli Mathias Zurlinden Mathias Zurlinden Thomas Bolli and Mathias Zurlinden 2009 SNB Working Papers 2009-01 J24 J31 http://www.snb.ch/n/mmr/reference/working_paper_2008_19/source/working_paper_2008_19.n.pdf Household borrowing in a foreign currency is a widespread phenomenon in Austria. Twelve percent of Austrian households report their housing loan to be denominated in either Swiss franc or Japanese yen for example. Yet, despite its importance, peculiar character, and immediate policy concerns, we know too little about the attitudes and characteristics of the households involved in this type of carry trade. We analyze a uniquely detailed financial wealth survey of 2,556 Austrian households to sketch a comprehensive profile of the attitudes and characteristics of the households involved. We employ both univariate tests and multivariate multinomial logit models. The survey data suggests that risk-loving, wealthy, and married households are more likely to take a housing loan in a foreign currency. High-income households are more likely to take a housing loan in general. These findings may partially assuage policy concerns about household default risk on foreign-currency housing loans. 2011-06-26T22:08:19+01:00 en Borrowing in Foreign Currency: Austrian Households as Carry Traders Borrowing in Foreign Currency: Austrian Households as Carry Traders 2011-06-26T22:08:19+01:00 oreign currency borrowing mortgages banking sector Austria Swissfrancs Borrowing in Foreign Currency: Austrian Households as Carry Traders http://www.snb.ch/n/mmr/reference/working_paper_2008_19/source/working_paper_2008_19.n.pdf PDF version Christian Beer Christian Beer Steven Ongena Steven Ongena Marcel Peter Marcel Peter Christian Beer, Steven Ongena and Marcel Peter 2008 SNB Working Papers 2008-19 G21 G15 F34 F37 http://www.snb.ch/n/mmr/reference/working_paper_2008_18/source/working_paper_2008_18.n.pdf This paper develops a new methodology to estimate the effect of low-wage import competition on U.S. producer prices. We first document that when low-wage countries grow, their exports to the United States increase most in labor-intensive sectors. Second, we demonstrate that the temporary and relative component of imports induced by labor intensity and output growth in low-wage countries is orthogonal to U.S. supply and demand shocks and can, therefore, be utilized to identify the causal impact of import competition on prices. In a panel covering 325 manufacturing industries from 1997 to 2006, we find that imports from nine low-wage countries are associated with strong downward pressure on U.S. prices. When these nations capture 1% U.S. market share, producer prices decrease by 3.1%, which is nearly fully accounted by a 2.4% increase in labor productivity and a 0.4% decrease in markups. Overall, we find that imports from the examined countries have decreased U.S. manufacturing PPI inflation by around two percentage points each year. 2011-06-26T22:08:18+01:00 en The Effect of Low-Wage Import Competition on U.S. Inflationary Pressure The Effect of Low-Wage Import Competition on U.S. Inflationary Pressure 2011-06-26T22:08:18+01:00 Low-Wage Country Import Competition Comparative Advantage Globalization The Effect of Low-Wage Import Competition on U.S. Inflationary Pressure http://www.snb.ch/n/mmr/reference/working_paper_2008_18/source/working_paper_2008_18.n.pdf PDF version Raphael Anton Auer Raphael Anton Auer Andreas M. Fischer Andreas M. Fischer Raphael Anton Auer and Andreas M. Fischer 2008 SNB Working Papers 2008-18 F14 F15 F16 http://www.snb.ch/n/mmr/reference/working_paper_2008_17/source/working_paper_2008_17.n.pdf We study the impact of reputational incentives in markets characterized by moral hazard problems. Social preferences have been shown to enhance contract enforcement in these markets, while at the same time generating considerable wage and price rigidity. Reputation powerfully amplifies the positive effects of social preferences on contract enforcement by increasing contract efficiency substantially. This effect is, however, associated with a considerable bilateralisation of market interactions, suggesting that it may aggravate price rigidities. Surprisingly, reputation in fact weakens the wage and price rigidities arising from social preferences. Thus, in markets characterized by moral hazard, reputational incentives unambiguously increase mutually beneficial exchanges, reduce rents, and render markets more responsive to supply and demand shocks. 2011-06-26T22:08:17+01:00 en On Reputation: A Microfoundation of Contract Enforcement and Price Rigidity On Reputation: A Microfoundation of Contract Enforcement and Price Rigidity 2011-06-26T22:08:17+01:00 Reputation Reciprocity Relational Contracts Price Rigidity Wage Rigidity On Reputation: A Microfoundation of Contract Enforcement and Price Rigidity http://www.snb.ch/n/mmr/reference/working_paper_2008_17/source/working_paper_2008_17.n.pdf PDF version Ernst Fehr Ernst Fehr Martin Brown Martin Brown Christian Zehnder Christian Zehnder Ernst Fehr, Martin Brown and Christian Zehnder 2008 SNB Working Papers 2008-17 D82 J3 J41 E24 C9 http://www.snb.ch/n/mmr/reference/working_paper_2008_16/source/working_paper_2008_16.n.pdf We study the responses of residential property and equity prices, inflation and economic activity to monetary policy shocks in 17 countries, using data spanning 1986-2006, using single-country VARs and panel VARs in which we distinguish between groups of countries depending on their financial systems. The effect of monetary policy on property prices is only about three times as large as its impact on GDP. Using monetary policy to guard against financial instability by offsetting asset-price movements thus has sizable effects on economic activity. While the financial structure influences the impact of policy on asset prices, its importance appears limited. 2011-06-26T22:08:16+01:00 en Financial Structure and the Impact of Monetary Policy on Asset Prices Financial Structure and the Impact of Monetary Policy on Asset Prices 2011-06-26T22:08:16+01:00 asset prices monetary policy panel VAR Financial Structure and the Impact of Monetary Policy on Asset Prices http://www.snb.ch/n/mmr/reference/working_paper_2008_16/source/working_paper_2008_16.n.pdf PDF version Katrin Assenmacher-Wesche Katrin Assenmacher-Wesche Stefan Gerlach Stefan Gerlach Katrin Assenmacher-Wesche and Stefan Gerlach 2008 SNB Working Papers 2008-16 C23 E52 http://www.snb.ch/n/mmr/reference/working_paper_2008_15/source/working_paper_2008_15.n.pdf This paper investigates price-setting behaviour of firms based on the individual price quotes underlying the Swiss consumer price index. The data set covers the years from 1993 to 2005. Six main findings emerge from the analysis. (i) Prices are sticky; the median duration amounts to 4.6 quarters. (ii) Price-setting behaviour is heterogeneous across sectors and outlet characteristics. (iii) Price changes are sizeable; the median absolute size amounts to 9.4%. (iv) There is no indication of general downward price stickiness; even in the case of positive inflation, 41.3% of all price adjustments are decreases and the distributions of price changes do not show substantial asymmetries. (v) Firms respond to expected cost shocks at the date of their occurrence; VAT rate changes do not lead to more price adjustments before they take effect. (vi) There is some evidence that firms adjust their behaviour according to the state of the economy; in particular, firms facing higher rates of inflation adjust prices more frequently. 2011-06-26T22:08:15+01:00 en Price-Setting Behaviour in Switzerland Evidence from CPI Micro Data Price-Setting Behaviour in Switzerland Evidence from CPI Micro Data 2011-06-26T22:08:15+01:00 Price-setting frequency of price changes nominal price rigidity time-dependent pricing state-dependent pricing Price-Setting Behaviour in Switzerland Evidence from CPI Micro Data http://www.snb.ch/n/mmr/reference/working_paper_2008_15/source/working_paper_2008_15.n.pdf PDF version Daniel Kaufmann Daniel Kaufmann Daniel Kaufmann 2008 SNB Working Papers 2008-15 E31 D40 http://www.snb.ch/n/mmr/reference/working_paper_2008_14/source/working_paper_2008_14.n.pdf This paper analyzes the behavior of the Swiss franc (CHF) over the past 35 years. It relates the evolution of the CHF exchange rates to economic fundamentals like the relative competitiveness of the Swiss export sector, accumulated current accounts, interest rate differentials and oil prices. Some factors like the introduction of the euro, a relative increase in Swiss domestic productivity and higher oil prices seem to have modified the CHF behavior in the last decade, but more data will be needed to draw definitive conclusions. The paper relies on different data sources and assesses potential exchange rate determinants under different angles. Overall, measurement and econometric issues would make it difficult to determine a unique econometric specification or specific values for equilibrium exchange rates. 2011-06-26T22:08:14+01:00 en What Drives the Swiss Franc? What Drives the Swiss Franc? 2011-06-26T22:08:14+01:00 Swiss franc exchange rates fundamentals What Drives the Swiss Franc? http://www.snb.ch/n/mmr/reference/working_paper_2008_14/source/working_paper_2008_14.n.pdf PDF version Samuel Reynard Samuel Reynard Samuel Reynard 2008 SNB Working Papers 2008-14 F31 F32 http://www.snb.ch/n/mmr/reference/working_paper_2008_13/source/working_paper_2008_13.n.pdf This paper presents results on human capital accumulation for the Swiss economy. We find that the index of labour quality has grown at a rate of 0.5% per year from 1991 to 2006. The main sources are the growth in average levels of education and the passing of the baby boom cohort through the age structure of the workforce. Projections over the period 2006-2050 suggest that labour quality growth will slow down with time. We also calculate a quality-adjusted unemployment rate and find that the unemployment rate is reduced by about 0.3 pp when human capital accumulation is taken into account. 2011-06-26T22:08:13+01:00 en Measuring growth of labour quality and the quality-adjusted unemployment rate in Switzerland Measuring growth of labour quality and the quality-adjusted unemployment rate in Switzerland 2011-06-26T22:08:13+01:00 human capital labour quality unemployment rate Measuring growth of labour quality and the quality-adjusted unemployment rate in Switzerland http://www.snb.ch/n/mmr/reference/working_paper_2008_13/source/working_paper_2008_13.n.pdf PDF version Thomas Bolli Thomas Bolli Mathias Zurlinden Mathias Zurlinden Thomas Bolli and Mathias Zurlinden 2008 SNB Working Papers 2008-13 E24 J24 J31 http://www.snb.ch/n/mmr/reference/working_paper_2008_12/source/working_paper_2008_12.n.pdf With the help of a simple Ricardian model, this paper explores the role of industrial policy in self-enforcing trade agreements. A first part shows that the optimal self-enforcing trade agreement includes subsidies to inefficient, import-competing sectors. Second, when by some exogenous or endogenous force the comparative advantage deepens, subsidies go to declining industries. Key assumptions driving these results are: essentiality of imported goods and a high flexibility of the countries' industrial structure. A final part relaxes the latter assumption and shows that under rigid industrial structures subsidies favoring import competing sectors actually destabilize trade agreements. 2011-06-26T22:08:12+01:00 en How to Use Industrial Policy to Sustain Trade Agreements How to Use Industrial Policy to Sustain Trade Agreements 2011-06-26T22:08:12+01:00 Trade Agreement Self-enforceability Industrial Policy How to Use Industrial Policy to Sustain Trade Agreements http://www.snb.ch/n/mmr/reference/working_paper_2008_12/source/working_paper_2008_12.n.pdf PDF version Philip Sauré Philip Sauré Philip Sauré 2008 SNB Working Papers 2008-12 F10 F13 http://www.snb.ch/n/mmr/reference/working_paper_2008_11/source/working_paper_2008_11.n.pdf This paper presents estimates of the aggregate net (wealth) capital stock and aggregate capital services for Switzerland. We derive these estimates in a consistent manner using the perpetual inventory method. Due to changes in data availability, the time series cover the period 1970-2005 for a 2-asset breakdown (equipment and structures) and 1990-2005 for a 12-asset breakdown (nine categories of equipment and three of structures). The sensitivity of the results is examined by varying assumptions on the initial capital stocks, the length of asset lives, the method for calculating service prices, and the choice of ICT deflators. Differences to the estimates published recently by the Federal Statistical Office are summarised in the appendix. 2011-06-26T22:08:11+01:00 en Measuring capital stocks and capital services in Switzerland Measuring capital stocks and capital services in Switzerland 2011-06-26T22:08:11+01:00 capital stock capital services ICT goods Measuring capital stocks and capital services in Switzerland http://www.snb.ch/n/mmr/reference/working_paper_2008_11/source/working_paper_2008_11.n.pdf PDF version Barbara Rudolf Barbara Rudolf Mathias Zurlinden Mathias Zurlinden Barbara Rudolf and Mathias Zurlinden 2008 SNB Working Papers 2008-11 C43 D24 D92 E22 http://www.snb.ch/n/mmr/reference/working_paper_2008_10/source/working_paper_2008_10.n.pdf We analyze the financial integration of the new European Union (EU) member states' stock markets using the negative (positive) coexceedance variable that counts the number of large negative (large positive) returns on a given day across the countries. We use a multinomial logit model to investigate how persistence, asset classes, and volatility are related to the coexceedance variables. We find that the effects differ (a) between negative and positive coexceedance variables (b) between old and new EU member states, and (c) before and after the EU enlargement in 2004 suggesting a closer connection of new EU stock markets to those in Western Europe. 2011-06-26T22:08:10+01:00 en Extreme Coexceedances in New EU Member States' Stock Markets Extreme Coexceedances in New EU Member States' Stock Markets 2011-06-26T22:08:10+01:00 Financial market integration Comovement Emerging markets EU enlargement EU Member States Extreme returns New EU Member States Stock Markets Extreme Coexceedances in New EU Member States' Stock Markets http://www.snb.ch/n/mmr/reference/working_paper_2008_10/source/working_paper_2008_10.n.pdf PDF version Charlotte Christiansen Charlotte Christiansen Angelo Ranaldo Angelo Ranaldo Charlotte Christiansen and Angelo Ranaldo 2008 SNB Working Papers 2008-10 C25 F36 G15 http://www.snb.ch/n/mmr/reference/working_paper_2008_09/source/working_paper_2008_09.n.pdf Does global currency volume increase on days when the Federal Open Market Committee (FOMC) meets? To test the hypothesis of excess currency volume on FOMC days, we use a novel data set from the Continuous Linked Settlement (CLS) Bank. The CLS measure captures roughly half of the global trading volume in foreign exchange (FX) markets. We find strong evidence that trading volume increases in the order of 5% across currency areas on FOMC days during 2003 to 2007. This result holds irrespective of the size of price changes in currency markets and FOMC policy shocks. The new evidence of excess FX trading on FOMC days is inconsistent with standard models of the asset market approach with homogenous agents. 2011-06-26T22:08:09+01:00 en Does FOMC News Increase Global FX Trading? Does FOMC News Increase Global FX Trading? 2011-06-26T22:08:09+01:00 Trading volume FOMC Global linkages Does FOMC News Increase Global FX Trading? http://www.snb.ch/n/mmr/reference/working_paper_2008_09/source/working_paper_2008_09.n.pdf PDF version Andreas M. Fischer Andreas M. Fischer Angelo Ranaldo Angelo Ranaldo Andreas M. Fischer and Angelo Ranaldo 2008 SNB Working Papers 2008-09 F31 G12 http://www.snb.ch/n/mmr/reference/working_paper_2008_08/source/working_paper_2008_08.n.pdf While the direct impact of geographic endowments on prosperity is present in all countries, in former colonies, geography has also affected colonization policies and institutional outcomes. Thus, one can disentangle the partial effects of endowments and institutions on income by utilizing the interaction of geography and colonial experience. I first document that climate and disease did affect institutional development in the group of former colonies while this is not the case in the rest of the world. Second, I develop an empirical strategy that identifies the relation between institutions and income but that also accounts for the direct effect of endowments. I find that institutions are the main determinant of development and that endowments also have a sizeable direct impact on development. Third, I highlight the importance of disease environment for both colonization policies and income directly. 2011-06-26T22:08:08+01:00 en The Colonial and Geographic Origins of Comparative Development The Colonial and Geographic Origins of Comparative Development 2011-06-26T22:08:08+01:00 Growth Institutions Geography Comparative Development Colonialism The Colonial and Geographic Origins of Comparative Development http://www.snb.ch/n/mmr/reference/working_paper_2008_08/source/working_paper_2008_08.n.pdf PDF version Raphael Anton Auer Raphael Anton Auer Raphael Anton Auer 2008 SNB Working Papers 2008-08 O11 P16 P51 R11 N50 F54 http://www.snb.ch/n/mmr/reference/working_paper_2008_07/source/working_paper_2008_07.n.pdf When unemployment prevails, relations with a particular firm are valuable for workers. As a consequence, a worker may adhere to an implicit agreement to provide high effort, even when performance is no third-party enforceable. But can implicit agreements - or relational contracts - also motivate high worker performance when the labor market is tight? We examine this question by implementing an experimental market in which there is an excess demand for labor and the performance of workers is not third-party enforceable. We show that relational contracts emerge in which firms reward performing workers with wages that exceed the going market rate. This motivates workers to provide high effort, even though they could shirk and switch firms. Our results thus suggest that unemployment is not a necessary device to motivate workers. We also discuss how market conditions affect relational contracting by comparing identical labor markets with excess supply and excess demand for labor. Long-term relationships turn out to be less frequent when there is excess demand for labor compared to a market characterized by unemployment. Surprisingly though, this does not compromise market performance. 2011-06-26T22:08:07+01:00 en Competition and Relational Contracts: The Role of Unemployment as a Disciplinary Device Competition and Relational Contracts: The Role of Unemployment as a Disciplinary Device 2011-06-26T22:08:07+01:00 Relational Contracts Involuntary Unemployment Competition and Relational Contracts: The Role of Unemployment as a Disciplinary Device http://www.snb.ch/n/mmr/reference/working_paper_2008_07/source/working_paper_2008_07.n.pdf PDF version Martin Brown Martin Brown Armin Falk Armin Falk Ernst Fehr Ernst Fehr Martin Brown, Armin Falk and Ernst Fehr 2008 SNB Working Papers 2008-07 C90 D82 E24 J30 J41 http://www.snb.ch/n/mmr/reference/working_paper_2008_06/source/working_paper_2008_06.n.pdf This paper builds up an extension to the Mussa and Rosen (1978) model of quality pricing under perfect competition. Our model incorporates decreasing returns to scale. First, we predict that exchange rate shocks are imperfectly passed through into prices. Second, prices of low quality goods are more sensitive to exchange rate shocks than prices of high quality goods. Third, in response to an exchange rate appreciation, the composition of exports shifts towards higher quality and more expensive goods. We test those predictions using highly disaggregated price and quantity US import data. We find that the prices of high quality goods, proxied as high unit price goods, are more sensitive to exchange rate movements. Moreover, we find evidence that in response to an exchange rate appreciation, the composition of exports shifts towards high unit price goods. 2011-06-26T22:08:06+01:00 en Cost Pass Through in a Competitive Model of Pricing-to-Market Cost Pass Through in a Competitive Model of Pricing-to-Market 2011-06-26T22:08:06+01:00 Pricing-to-Market Exchange Rate Pass Through Local Distribution Cost Pass Through in a Competitive Model of Pricing-to-Market http://www.snb.ch/n/mmr/reference/working_paper_2008_06/source/working_paper_2008_06.n.pdf PDF version Raphael Anton Auer Raphael Anton Auer Thomas Chaney Thomas Chaney Raphael Anton Auer and Thomas Chaney 2008 SNB Working Papers 2008-06 F11 F31 F41 http://www.snb.ch/n/mmr/reference/working_paper_2008_05/source/working_paper_2008_05.n.pdf Are weekly inflation forecasts informative? Although several central banks review and discuss monetary policy issues on a bi-weekly basis, there have been few attempts by analysts to construct systematic estimates of core inflation that supports such a decision-making schedule. The timeliness of news releases and macroeconomic revisions are recognized to be an important information source in real-time estimation. We incorporate real-time information from macroeconomic releases and revisions into our weekly updates of monthly Swiss core inflation using a common factor procedure. The weekly estimates for Swiss core inflation find that it is worthwhile to update the forecast at least twice a month. 2011-06-26T22:08:05+01:00 en Are Weekly Inflation Forecasts Informative? Are Weekly Inflation Forecasts Informative? 2011-06-26T22:08:05+01:00 Inflation Common Factors Sequential Information Flow Are Weekly Inflation Forecasts Informative? http://www.snb.ch/n/mmr/reference/working_paper_2008_05/source/working_paper_2008_05.n.pdf PDF version Marlene Amstad Marlene Amstad Andreas M. Fischer Andreas M. Fischer Marlene Amstad and Andreas M. Fischer 2008 SNB Working Papers 2008-05 E52 E58 http://www.snb.ch/n/mmr/reference/working_paper_2008_04/source/working_paper_2008_04.n.pdf In this paper I examine how the protection of creditors' rights influence the way in which foreign bank entry affects the access to credit of firms. Using a sample of more than 6000 firms in 22 transition countries I find that as bankruptcy proceedings become more inefficient foreign bank entry is more likely to crowd-out small and opaque firms. Conversely, as the protection of creditors' rights improve, the positive association between foreign banks and firms' credit constraints diminishes. These results are robust to controls for endogeneity of foreign banks. The interaction of foreign banks and the protection of creditors rights would explain the disparity of results obtained by previous studies: In countries with an adequate protection of creditor rights foreign bank entry may benefit all firms; By contrast, in countries with weak protection of creditor rights foreign bank entry is likely to result in a credit crunch. 2011-06-26T22:08:04+01:00 en Foreign bank entry, institutional development and credit access: firm-level evidence from 22 transition countries Foreign bank entry, institutional development and credit access: firm-level evidence from 22 transition countries 2011-06-26T22:08:04+01:00 Institutional development Transition Foreign Bank Entry Information asymmetries Small Business Lending Foreign bank entry, institutional development and credit access: firm-level evidence from 22 transition countries http://www.snb.ch/n/mmr/reference/working_paper_2008_04/source/working_paper_2008_04.n.pdf PDF version Clara Rueda Maurer Clara Rueda Maurer Clara Rueda Maurer 2008 SNB Working Papers 2008-04 G10 G21 G31 D82 http://www.snb.ch/n/mmr/reference/working_paper_2008_03/source/working_paper_2008_03.n.pdf This paper uses vector error correction models of Switzerland for forecasting output, inflation and the short-term interest rate. It considers three different ways of dealing with forecast uncertainties. First, it investigates the effect on forecasting performance of averaging over forecasts from different models. Second, it considers averaging forecasts from different estimation windows. It is found that averaging over estimation windows is at least as effective as averaging over different models and both complement each other. Third, it examines whether using weighting schemes from the machine learning literature improves the average forecast. Compared to equal weights the effect of alternative weighting schemes on forecast accuracy is small in the present application. 2011-06-26T22:08:03+01:00 en Forecasting the Swiss Economy Using VECX* Models: An Exercise in Forecast Combination Across Modelsand Observation Windows Forecasting the Swiss Economy Using VECX* Models: An Exercise in Forecast Combination Across Modelsand Observation Windows 2011-06-26T22:08:03+01:00 Bayesian model averaging choice of observation window long-run structural vector autoregression Forecasting the Swiss Economy Using VECX* Models: An Exercise in Forecast Combination Across Modelsand Observation Windows http://www.snb.ch/n/mmr/reference/working_paper_2008_03/source/working_paper_2008_03.n.pdf PDF version Katrin Assenmacher-Wesche Katrin Assenmacher-Wesche M. Hashem Pesaran M. Hashem Pesaran Katrin Assenmacher-Wesche and M. Hashem Pesaran 2008 SNB Working Papers 2008-03 C53 C32 http://www.snb.ch/n/mmr/reference/working_paper_2008_02/source/working_paper_2008_02.n.pdf We construct a factor model of the yield curve and specify time series processes for these factors, so that the innovations are mutually orthogonal. At the same time, the factors are constructed in such a way that they assume clear, intuitive interpretations. The resulting "intelligible factors" should prove useful for investment professionals to discuss expectations about yield curves and the implied dynamics. Moreover, they allow us to distinguish announced changes of the monetary policy stance versus monetary policy surprises, which are ctually rare. We identify two such events, namely September 11, 2001, and the Fed reaction to the recent subprime crisis. 2011-06-26T22:08:02+01:00 en Intelligible Factors for the Yield Curve Intelligible Factors for the Yield Curve 2011-06-26T22:08:02+01:00 yield curve factor models structural vector autoregression monetary policy Intelligible Factors for the Yield Curve http://www.snb.ch/n/mmr/reference/working_paper_2008_02/source/working_paper_2008_02.n.pdf PDF version Yvan Lengwiler Yvan Lengwiler Carlos Lenz Carlos Lenz Yvan Lengwiler and Carlos Lenz 2008 SNB Working Papers 2008-02 E43 http://www.snb.ch/n/mmr/reference/working_paper_2008_01/source/working_paper_2008_01.n.pdf We examine how asymmetric information and competition in the credit market affect voluntary information sharing between lenders. We study an experimental credit market in which information sharing can help lenders to distinguish good borrowers from bad ones, ecause borrowers may exogenously switch locations. Lenders are, however, engaged in spatial competition, and thus may lose market power by sharing information with competitors. Our results suggest that asymmetric information in the credit market increases the frequency of information sharing between lenders significantly. Competition between lenders reduces information sharing, but the impact of competition seems to be only of second order importance. 2011-06-26T22:08:01+01:00 en The Emergence of Information Sharing in Credit Markets The Emergence of Information Sharing in Credit Markets 2011-06-26T22:08:01+01:00 information sharing credit competition asymmetric information The Emergence of Information Sharing in Credit Markets http://www.snb.ch/n/mmr/reference/working_paper_2008_01/source/working_paper_2008_01.n.pdf PDF version Martin Brown Martin Brown Christian Zehnder Christian Zehnder Martin Brown and Christian Zehnder 2008 SNB Working Papers 2008-01 D82 G21 G28 http://www.snb.ch/n/mmr/reference/working_paper_2007_17/source/working_paper_2007_17.n.pdf We study high-frequency exchange rate movements over the sample 1993-2006. We document that the (Swiss) franc, euro, Japanese yen and the pound tend to appreciate against the U.S. dollar when (a) S&P has negative returns; (b) U.S. bond prices increase; and (c) when currency markets become more volatile. In these situations, the franc appreciates also against the other currencies, while the pound depreciates. These safe haven properties of the franc are visible for different time granularities (from a few hours to several days), during both "ordinary days" and crisis episodes and show some non-linear features. 2011-06-26T22:07:17+01:00 en Safe Haven Currencies Safe Haven Currencies 2011-06-26T22:07:17+01:00 high-frequency data crisis episodes non-linear effects Safe Haven Currencies http://www.snb.ch/n/mmr/reference/working_paper_2007_17/source/working_paper_2007_17.n.pdf PDF version Angelo Ranaldo Angelo Ranaldo Paul Söderlind Paul Söderlind Angelo Ranaldo and Paul Söderlind 2007 SNB Working Papers 2007-17 F31 G15 http://www.snb.ch/n/mmr/reference/working_paper_2007_16/source/working_paper_2007_16.n.pdf Survey information on Swiss exporters is used to test the hypothesis that firm-specific factors, in particular firm size, are important determinants of pricing-to-market (PTM). The survey asked exporters whether they set dif- ferent prices across markets and, if so, whether price segmentation occurred because of pricing conditions in the local market or other factors. The empirical analysis is based on a probit model that regresses a binary-choice variable of PTM on firm size and other control variables. The main empirical finding is that firm size and PTM are positively and significantly correlated. A further result is that while firms whose main export market is in the Euro area are less likely to engage in PTM, firm size plays a bigger role for them. These results are robust across different PTM classifications, regression specifications, export destinations, and industrial sectors. 2011-06-26T22:07:16+01:00 en Who Prices Locally? Survey Evidence of Swiss Exporters Who Prices Locally? Survey Evidence of Swiss Exporters 2011-06-26T22:07:16+01:00 Pricing to markets local currency pricing .rm size Who Prices Locally? Survey Evidence of Swiss Exporters http://www.snb.ch/n/mmr/reference/working_paper_2007_16/source/working_paper_2007_16.n.pdf PDF version Andreas M. Fischer Andreas M. Fischer Matthias Lutz Matthias Lutz Manuel Wälti Manuel Wälti Andreas M. Fischer, Matthias Lutz and Manuel Wälti 2007 SNB Working Papers 2007-16 F10 F14 http://www.snb.ch/n/mmr/reference/working_paper_2007_15/source/working_paper_2007_15.n.pdf We investigate whether information sharing among banks has affected credit market performance in the transition countries of Eastern Europe and the former Soviet Union, using a large sample of firm-level data. Our estimates show that information sharing is associated with improved availability and lower cost of credit to firms. This correlation is stronger for opaque firms than transparent firms, and stronger in countries with weak legal environments than countries with strong legal environments. In cross-sectional estimates, we control for variation in country-level aggregate variables that may affect credit, by examining the differential impact of information sharing across firm types. In panel estimates, we also control for the presence of unobserved heterogeneity at the firm level, as well as for changes in macroeconomic variables and the legal environment. 2011-06-26T22:07:15+01:00 en Information Sharing and Credit: Firm-Level Evidence from Transition Countries Information Sharing and Credit: Firm-Level Evidence from Transition Countries 2011-06-26T22:07:15+01:00 information sharing credit access transition countries Information Sharing and Credit: Firm-Level Evidence from Transition Countries http://www.snb.ch/n/mmr/reference/working_paper_2007_15/source/working_paper_2007_15.n.pdf PDF version Martin Brown Martin Brown Tullio Jappelli Tullio Jappelli Marco Pagano Marco Pagano Martin Brown, Tullio Jappelli and Marco Pagano 2007 SNB Working Papers 2007-15 D82 G21 G28 O16 P34 http://www.snb.ch/n/mmr/reference/working_paper_2007_14/source/working_paper_2007_14.n.pdf In this paper, we investigate how, in a stylised theoretical framework, an increase in the degree of globalization - modelled as a deline in trade costs - affects the real natural rate of interest by impacting firms markups. Outlining a two- country dynamic general equilibrium model with endogenous elasticity of substitution between goods, we suggest two main propositions: 1) Globalization - via the impplied variation in markups - has a potentially significant impact on the natural rate of interest. 2) Simple, plausible markup dynamics may have contributed to explain the recent "conundrum" of world interest rates. 2011-06-26T22:07:14+01:00 en Globalization, markups and the natural rate of interest Globalization, markups and the natural rate of interest 2011-06-26T22:07:14+01:00 globalization natural interest rate trade costs Globalization, markups and the natural rate of interest http://www.snb.ch/n/mmr/reference/working_paper_2007_14/source/working_paper_2007_14.n.pdf PDF version Jean-Marc Natal Jean-Marc Natal Nicolas Stoffels Nicolas Stoffels Jean-Marc Natal and Nicolas Stoffels 2007 SNB Working Papers 2007-14 E43 F15 F41 F49 http://www.snb.ch/n/mmr/reference/working_paper_2007_13/source/working_paper_2007_13.n.pdf Recently, the Bank of Japan outlined a two perspectives approach to the conduct of monetary policy that focuses on risks to price stability over different time horizons. Interpreting this as pertaining to different frequency bands, we use band spectrum regression to study the determination of inflation in Japan. We find that inflation is related to money growth and real output growth at low frequencies and the output gap at higher frequencies. Moreover, this relationship reflects Granger causality from money growth and the output gap to inflation in the relevant frequency bands. 2011-06-26T22:07:13+01:00 en Monetary Factors and Inflation in Japan Monetary Factors and Inflation in Japan 2011-06-26T22:07:13+01:00 spectral regression frequency domain Phillips curve quantity theory Monetary Factors and Inflation in Japan http://www.snb.ch/n/mmr/reference/working_paper_2007_13/source/working_paper_2007_13.n.pdf PDF version Katrin Assenmacher-Wesche Katrin Assenmacher-Wesche Stefan Gerlach Stefan Gerlach Toshitaka Sekine Toshitaka Sekine Katrin Assenmacher-Wesche, Stefan Gerlach and Toshitaka Sekine 2007 SNB Working Papers 2007-13 C22 E3 E5 http://www.snb.ch/n/mmr/reference/working_paper_2007_12/source/working_paper_2007_12.n.pdf This paper examines a special episode in communication practices of the Swiss National Bank (SNB) when short-term interest rates reached the zero bound. A particular feature of SNB communication policy at the time was to talk openly about alternative policy instruments despite the fact that they were never implemented. Non-sterilized FX interventions were frequently mentioned as a potential instrument. We ask how did financial markets respond to the SNBs repeated references of non-sterilized interventions? The empirical results with high frequency data provide strong evidence that SNB intervention references depreciated the domestic currency for several hours. The case study supports the view that communication is an effective tool for monetary policy. 2011-06-26T22:07:12+01:00 en Communicating Policy Options at the Zero Bound Communicating Policy Options at the Zero Bound 2011-06-26T22:07:12+01:00 Exchange Rate Central Bank Communication Zero Bound Communicating Policy Options at the Zero Bound http://www.snb.ch/n/mmr/reference/working_paper_2007_12/source/working_paper_2007_12.n.pdf PDF version Lukas Burkhard Lukas Burkhard Andreas M. Fischer Andreas M. Fischer Lukas Burkhard and Andreas M. Fischer 2007 SNB Working Papers 2007-12 F31 E58 http://www.snb.ch/n/mmr/reference/working_paper_2007_11/source/working_paper_2007_11.n.pdf In this paper we analyze high-frequency movements in Swiss financial markets in reaction to real-time communication by the Swiss National Bank. Our analysis of central bank communication encompasses official speeches and interviews, not only monetary policy announcements. We examine the reactions of the currency market, the bond market and the stock exchange. The evidence suggests that speeches and interviews, along with monetary policy announcements, engender a significant price reaction. This paper sheds light on the relevance of communications other than monetary policy announcements. 2011-06-26T22:07:11+01:00 en The reaction of asset markets to Swiss National Bank communication The reaction of asset markets to Swiss National Bank communication 2011-06-26T22:07:11+01:00 central bank communication speeches interviews monetary policy announcements financial market reaction high-frequency data The reaction of asset markets to Swiss National Bank communication http://www.snb.ch/n/mmr/reference/working_paper_2007_11/source/working_paper_2007_11.n.pdf PDF version Angelo Ranaldo Angelo Ranaldo Enzo Rossi Enzo Rossi Angelo Ranaldo and Enzo Rossi 2007 SNB Working Papers 2007-11 F31 G15 http://www.snb.ch/n/mmr/reference/working_paper_2007_10/source/working_paper_2007_10.n.pdf Multivariate filters based on the Hodrick-Prescott filter are appealing because they combine the advantages of the Hodrick-Prescott filter with economic relationships. Recently, a new multivariate filter has been put forward by Hirose and Kamada (2003). In this article we apply this new filter to Swiss data spanning the period from 1981 to 2005. We estimate both potential output and the associated output gap with quarterly data. Moreover, a model-consistent Phillips curve for an open economy is derived from simple economic relationships. Based on the estimated Phillips curve, we investigate exchange-rate pass through effects on consumer prices. We find only a weak transmission of exchange rate fluctuations into consumer prices. 2011-06-26T22:07:10+01:00 en Applying the Hirose-Kamada filter to Swiss data: Output gap and exchange rate pass-through estimates Applying the Hirose-Kamada filter to Swiss data: Output gap and exchange rate pass-through estimates 2011-06-26T22:07:10+01:00 potential output output gap multivariate filter Hirose and Kamada filter exchange-rate pass through Applying the Hirose-Kamada filter to Swiss data: Output gap and exchange rate pass-through estimates http://www.snb.ch/n/mmr/reference/working_paper_2007_10/source/working_paper_2007_10.n.pdf PDF version Franziska Bignasca Franziska Bignasca Enzo Rossi Enzo Rossi Franziska Bignasca and Enzo Rossi 2007 SNB Working Papers 2007-10 E31 E32 F41 http://www.snb.ch/n/mmr/reference/working_paper_2007_09/source/working_paper_2007_09.n.pdf I address David Albouy's (2006) critique of the data constructed by Daron Acemoglu, Simon Johnson and James Robinson (2001). The contribution of this paper is to instrument for settler mortality rates that are collected from historical sources - and that may be measured with error - with a geographic model of the determinants of disease. I first establish that my instruments are significant predictors of mortality and are otherwise excludable to institutions. Among other things, the excludability is established by a falsification exercise, in which I document that the geographic potential for mortality strongly affected institutions in former colonies, yet it had no effect on institutions in the rest of the world. This differential effect settler mortality had on development can only be rationalized by the early institution building hypothesis that Acemoglu et al. argue for. I next repeat the analysis of Acemoglu et al. instrumenting for the historical mortality rate with its geographic projection. The instrumented mortality rate is a highly significant predictor of institutional quality. Moreover, this result is true when instrumenting for either the original data or the revised mortality series of Albouy. This result is also true when accounting for the population that the historical data was sampled from. Turning to the instrumental variable estimations, I show that also the relation between institutions and income is highly significant and that the associated importance of institutions for international income differences is substantial. Again this finding is true when using either of the two historical series and also when accounting for the population that the historical data was sampled from. I thus conclude that the empirical results presented in Acemoglu et al. indeed reflect their early institution building hypothesis rather than measurement error. 2011-06-26T22:07:09+01:00 en The Colonial Origins of Comparative Development: A Solution to the Debate on Settler Mortality Rates The Colonial Origins of Comparative Development: A Solution to the Debate on Settler Mortality Rates 2011-06-26T22:07:09+01:00 Comparative Development Growth Institutions Colonialism Property Rights Mortality The Colonial Origins of Comparative Development: A Solution to the Debate on Settler Mortality Rates http://www.snb.ch/n/mmr/reference/working_paper_2007_09/source/working_paper_2007_09.n.pdf PDF version Raphael Anton Auer Raphael Anton Auer Raphael Anton Auer 2007 SNB Working Papers 2007-09 N10 O11 O57 P16 P51 http://www.snb.ch/n/mmr/reference/working_paper_2007_08/source/working_paper_2007_08.n.pdf In this paper, we introduce a new algorithm to estimate the term structure of interest rates. It is obtained from a constrained optimization, where the objective is to minimize the integral of squared first derivatives of the instantaneous forward interest rate subject to the condition that the estimated bond prices lie within the range of observed bid and ask prices. We use a finite series of ordinary Laguerre polynomials to approximate the unknown function of the instantaneous forward interest rate. The objective function can be written explicitly as a quadratic form of the Laguerre constants and the nonlinear constraints can be obtained from a recurrence relationship. The estimation error is less than one basis point, given a sufficient number of bonds. 2011-06-26T22:07:08+01:00 en An Orthogonal Polynomial Approach to Estimate the Term Structure of Interest Rates An Orthogonal Polynomial Approach to Estimate the Term Structure of Interest Rates 2011-06-26T22:07:08+01:00 Term structure of interest rates orthogonal polynomial An Orthogonal Polynomial Approach to Estimate the Term Structure of Interest Rates http://www.snb.ch/n/mmr/reference/working_paper_2007_08/source/working_paper_2007_08.n.pdf PDF version Hans-Jürg Büttler Hans-Jürg Büttler Hans-Jürg Büttler 2007 SNB Working Papers 2007-08 C13 E43 http://www.snb.ch/n/mmr/reference/working_paper_2007_07/source/working_paper_2007_07.n.pdf We examine the impact of banking sector reforms on interest rates using bank-level data from Kyrgyzstan for 1998-2005. We find that increased confidence in the banking sector has contributed significantly to lowering interest rate levels, while the impact of lower intermediation costs, credit risk, and capital costs are negligible. Our results further suggest that the liberalization of the Kyrgyz financial sector has reduced both deposit and lending rates. Finally, we find that despite considerable restructuring, the Kyrgyz banking sector has not become more competitive. As a consequence, banks' interest rates have not fully responded to lower market rates following macroeconomic stabilization. 2011-06-26T22:07:07+01:00 en Banking Sector Reform and Interest Rates in Transition Economies: Bank-Level Evidence from Kyrgyzstan Banking Sector Reform and Interest Rates in Transition Economies: Bank-Level Evidence from Kyrgyzstan 2011-06-26T22:07:07+01:00 Transition Financial Sector Development Interest Rates Banking Sector Reform and Interest Rates in Transition Economies: Bank-Level Evidence from Kyrgyzstan http://www.snb.ch/n/mmr/reference/working_paper_2007_07/source/working_paper_2007_07.n.pdf PDF version Martin Brown Martin Brown Maria Rueda Maurer Maria Rueda Maurer Tamara Pak Tamara Pak Nurlanbek Tynaev Nurlanbek Tynaev Martin Brown, Maria Rueda Maurer, Tamara Pak and Nurlanbek Tynaev 2007 SNB Working Papers 2007-07 G21 O16 P34 http://www.snb.ch/n/mmr/reference/working_paper_2007_06/source/working_paper_2007_06.n.pdf Prospect theory has been the focus of increasing attention in many Fields of economics. However, it has scarcely been addressed in macro-economic growth models - neither on theoretical nor on empirical grounds. In this paper we use prospect theory in a stochastic optimal growth model. Thereafter, the focus lies on linking the Eulerequation obtained from a prospect theory growth model of this kind to real macroeconomic data. We will use Generalized Method of Moments (GMM) estimation to test the implications of such a non-linear prospect utility Euler equation. Our results indicate that loss aversion can be traced in aggregate macroeconomic time series. 2011-06-26T22:07:06+01:00 en Loss Aversion in Aggregate Macroeconomic Time Series Loss Aversion in Aggregate Macroeconomic Time Series 2011-06-26T22:07:06+01:00 Ramsey growth model loss aversion prospect theory GMM Loss Aversion in Aggregate Macroeconomic Time Series http://www.snb.ch/n/mmr/reference/working_paper_2007_06/source/working_paper_2007_06.n.pdf PDF version Rina Rosenblatt-Wisch Rina Rosenblatt-Wisch Rina Rosenblatt-Wisch 2006 SNB Working Papers 2007-06 E21 O41 http://www.snb.ch/n/mmr/reference/working_paper_2007_05/source/working_paper_2007_05.n.pdf This paper examines the usefulness of considering monetary aggregates when assessing monetary policy stance, and contrasts monetary analysis to the current mainstream monetary policy analysis. Monetary developments, unlike interest rate stance measures, are shown to provide quantitative information on subsequent price levels. Moreover, ignoring money and focusing on interest rates and real activity measures neglects crucial information as short-term velocity movements are fully part of the monetary policy transmission process. The analysis also sheds light on the recent change in inflation volatility and persistence as well as on the Phillips curve flattening. The empirical analysis is based on US data since the 1960s as well as euro area and Swiss data since the 1970s. 2011-06-26T22:07:05+01:00 en Maintaining Low Inflation: Money, Interest Rates, and Policy Stance Maintaining Low Inflation: Money, Interest Rates, and Policy Stance 2011-06-26T22:07:05+01:00 Monetary policy Monetary aggregates Inflation Output Taylor rule Equilibrium interest rate Maintaining Low Inflation: Money, Interest Rates, and Policy Stance http://www.snb.ch/n/mmr/reference/working_paper_2007_05/source/working_paper_2007_05.n.pdf PDF version Samuel Reynard Samuel Reynard Samuel Reynard 2007 SNB Working Papers 2007-05 E30 E41 E52 E58 http://www.snb.ch/n/mmr/reference/working_paper_2007_04/source/working_paper_2007_04.n.pdf We analyze regulatory capital requirements where the amount of required capital depends on the level of risk reported by the banks. It is shown that if the supervisors have a limited ability to identify or to sanction dishonest banks, an additional risk-independent leverage ration restriction may be necessary to induce truthful risk reporting. The leverage ration helps to offset the banks' potential capital savings of understating their risks by (i) reducing banks' put option value of limited ex ante, and by (ii) increasing the banks' net worth, which in turn enhances the supervisors' ability to sanction banks ex post. 2011-06-26T22:07:04+01:00 en Why 'Basel II' May Need a Leverage Ratio Restriction Why 'Basel II' May Need a Leverage Ratio Restriction 2011-06-26T22:07:04+01:00 Banks Capital requirement Leverage ratio restriction Basel II Why 'Basel II' May Need a Leverage Ratio Restriction http://www.snb.ch/n/mmr/reference/working_paper_2007_04/source/working_paper_2007_04.n.pdf PDF version Jürg M. Blum Jürg M. Blum Jürg M. Blum 2007 SNB Working Papers 2007-04 G21 G28 http://www.snb.ch/n/mmr/reference/economic_studies_2007_04/source/economic_studies_2007_04.n.pdf This study investigates the pass-through of exchange rate and import price shocks to different aggregated prices in Switzerland. The baseline analysis is carried out with recursively identified vector autoregressive (VAR) models. The data set comprises monthly observations, and pass-through effects are quantified by means of impulse response functions. Evidence shows that the exchange rate pass-through to import prices is substantial (although incomplete), but only moderate to total consumer prices. Moreover, a sub-sample analysis reveals that the pass-through decreased in the 1990s below the levels recorded in previous decades. This decrease was more pronounced for the pass-through to consumer prices than that to import prices, and it coincided with a shift towards lower and more stable consumer price inflation. 2011-06-26T22:07:04+01:00 en Exchange rate pass-through in Switzerland: Evidence from vector autoregressions Exchange rate pass-through in Switzerland: Evidence from vector autoregressions 2011-06-26T22:07:04+01:00 Exchange rate pass-through VAR consumer prices import prices Exchange rate pass-through in Switzerland: Evidence from vector autoregressions http://www.snb.ch/n/mmr/reference/economic_studies_2007_04/source/economic_studies_2007_04.n.pdf PDF version Jonas Stulz Jonas Stulz Jonas Stulz 2007 SNB Economic Studies 2007-04 C32 E31 F41 http://www.snb.ch/n/mmr/reference/economic_studies_2007_03/source/economic_studies_2007_03.n.pdf The practice of monetary policy has evolved a great deal since the early 1990s. This evolution was significantly influenced by rapid developments in the theory of monetary policy. A new consensus about 'principles-based' monetary policy appears to be emerging. It marries a firm long-term anchor for nominal stability, rooted in the original ideas behind inflation targeting, with short-term flexibility, based on a more discretionary and pragmatic approach to monetary policy. The SNB's monetary policy framework - with a firm nominal anchor but with an emphasis on the need for flexibility - reflects, to a considerable degree, the emerging academic consensus about best-practice monetary policy. With its successful seven-year track record, it may serve as an interesting case study for a policy aiming at an intermediate position between full discretion and rigidly defined short-term inflation targeting. 2011-06-26T22:07:03+01:00 en The Swiss National Bank's monetary policy policy concept - an example of a 'principles-based' policy framework The Swiss National Bank's monetary policy policy concept - an example of a 'principles-based' policy framework 2011-06-26T22:07:03+01:00 Swiss National Bank monetary policy inflation targeting rules discretion The Swiss National Bank's monetary policy policy concept - an example of a 'principles-based' policy framework http://www.snb.ch/n/mmr/reference/economic_studies_2007_03/source/economic_studies_2007_03.n.pdf PDF version Ernst Baltensperger Ernst Baltensperger Philipp M. Hildebrand Philipp M. Hildebrand Thomas J. Jordan Thomas J. Jordan Ernst Baltensperger, Philipp M. Hildebrand and Thomas J. Jordan 2007 SNB Economic Studies 2007-03 E42 E52 E58 http://www.snb.ch/n/mmr/reference/working_paper_2007_03/source/working_paper_2007_03.n.pdf This paper sheds light on a puzzling pattern in foreign exchange markets: Domestic currencies appreciate (depreciate) systematically during foreign (domestic) working hours. These time-of-day patterns are statistically and economically highly significant. They pervasively persist across many years, even after accounting for calendar effects. This phenomenon is difficult to reconcile with the random walk and market efficiency hypothesis. Microstructural and behavioural explanations suggest that the main raison d'etre is a domestic currency bias coupled with market segmentation. The prevalence of domestic (foreign) traders demanding the counterpart currency during domestic (foreign) working hours implies a cyclical net positive (negative) imbalance in dealers' inventory. In aggregate, this turns into sell-price (buy-price) pressure on the domestic currency during domestic (foreign) working hours. 2011-06-26T22:07:03+01:00 en Segmentation and Time-of-Day Patterns in Foreign Exchange Markets Segmentation and Time-of-Day Patterns in Foreign Exchange Markets 2011-06-26T22:07:03+01:00 foreign exchange market microstructure behavioural finance timeof-day patterns market segmentation calendar effects inventory asymmetric information high-frequency data Segmentation and Time-of-Day Patterns in Foreign Exchange Markets http://www.snb.ch/n/mmr/reference/working_paper_2007_03/source/working_paper_2007_03.n.pdf PDF version Angelo Ranaldo Angelo Ranaldo Angelo Ranaldo 2007 SNB Working Papers 2007-03 F31 G10 G14 G15 http://www.snb.ch/n/mmr/reference/working_paper_2007_02/source/working_paper_2007_02.n.pdf This paper examines whether the U.S. Federal Reserve has adjusted high-powered money supply in response to macroeconomic indicators. Applying ex-post and real-time data for the postwar period, we provide evidence that nonborrowed reserves responded to expected inflation and the output-gap. While the output-gap feedback has always been negative, the response of money supply to changes in inflation varies considerably across time. The inflation feedback is negative in the post-1979 period and positive, albeit smaller than one, in the pre-1979 period. Applying a standard macroeconomic model, these roperties are shown to be consistent with a welfare maximizing policy, and to ensure equilibrium determinacy. Viewed through the money supply lens, the Fed has thus never allowed for endogenous fluctuations, which contrasts conclusions drawn from federal funds rate analyses. 2011-06-26T22:07:02+01:00 en Federal Reserve Policy viewed through a Money Supply Lens Federal Reserve Policy viewed through a Money Supply Lens 2011-06-26T22:07:02+01:00 Nonborrowed reserves monetary policy reaction functions real-time data determinacy Federal Reserve Policy viewed through a Money Supply Lens http://www.snb.ch/n/mmr/reference/working_paper_2007_02/source/working_paper_2007_02.n.pdf PDF version Ibrahim Chowdhury Ibrahim Chowdhury Andreas Schabert Andreas Schabert Ibrahim Chowdhury and Andreas Schabert 2007 SNB Working Papers 2007-02 E51 E52 E32 http://www.snb.ch/n/mmr/reference/working_paper_2007_01/source/working_paper_2007_01.n.pdf We ask whether FX dealers from Kyrgyzstan, a low income country, have similar perceptions to FX dealers from other international financial centers. Perceptions of Kyrgyz FX dealers in the interbank market are tested using detailed survey data against survey information from five major financial centers. The survey evidence finds that the FX dealers' responses from the Kyrgyz interbank market differ from those from other international financial centers. Stark differences arise in the perceptions concerning the effectiveness of central bank interventions and the influence of speculation. 2011-06-26T22:07:01+01:00 en Do FX traders in Bishkek have similar perceptions to their London colleagues? Survey evidence of market ractitioners' views Do FX traders in Bishkek have similar perceptions to their London colleagues? Survey evidence of market ractitioners' views 2011-06-26T22:07:01+01:00 Foreign exchange traders survey study microstructure FX interventions Do FX traders in Bishkek have similar perceptions to their London colleagues? Survey evidence of market ractitioners' views http://www.snb.ch/n/mmr/reference/working_paper_2007_01/source/working_paper_2007_01.n.pdf PDF version Andreas M. Fischer Andreas M. Fischer Gulzina Isakova Gulzina Isakova Ulan Termechikov Ulan Termechikov Andreas M. Fischer, Gulzina Isakova and Ulan Termechikov 2007 SNB Working Papers 2007-01 C42 F31 G14 http://www.snb.ch/n/mmr/reference/working_paper_2006_11/source/working_paper_2006_11.n.pdf I analyze the price discovery, liquidity provision, and transaction-cost components driven by the real-time firm-specific news at the Paris Bourse. I find that the news impact depends on which type of news bulletin is released. Only news items causing extreme price disruptions such as earnings announcements enlarge spreads and information asymmetry risk. In contrast, the greater part of real-time firm-specific news releases is a magnet for liquidity and trading. This research provides insights into the market quality of limit-order book markets in which liquidity provision dynamically adapts to market conditions and information events. Limit order traders sustain liquidity even when facing extreme news impacts. 2011-06-26T22:06:11+01:00 en Intraday Market Dynamics Around Public Information Arrivals Intraday Market Dynamics Around Public Information Arrivals 2011-06-26T22:06:11+01:00 real-time information firm-specific news price discovery liquidity provision transaction-cost components information asymmetry limit-order book market earnings announcements price disruption high-frequency data Intraday Market Dynamics Around Public Information Arrivals http://www.snb.ch/n/mmr/reference/working_paper_2006_11/source/working_paper_2006_11.n.pdf PDF version Angelo Ranaldo Angelo Ranaldo Angelo Ranaldo 2006 SNB Working Papers 2006-11 G10 G14 http://www.snb.ch/n/mmr/reference/working_paper_2006_10/source/working_paper_2006_10.n.pdf In this paper, we measure the main factors explaining nominal output growth and deviations from trend output in Switzerland over the period 1980 to 2001. The decompositions are based on the GDP function and its dual, the national income function. The results indicate that whereas nominal output growth frequently reflects movements in domestic prices, it is capital formation that makes the largest contribution to real output growth, followed by gains in total factor productivity and improvements in the terms of trade. Deviations of real output from trend appear to have been driven by deviations of labour utilization, of productivity and, during the first decade, of the terms of trade from their respective long-run trends. The important role attributed to productivity and the terms of trade support the view that the customary measures of the output gap should be used with caution when formulating monetary policy. 2011-06-26T22:06:10+01:00 en On Understanding Sources of Growth and Output Gaps for Switzerland On Understanding Sources of Growth and Output Gaps for Switzerland 2011-06-26T22:06:10+01:00 GDP growth output gap index numbers welfare On Understanding Sources of Growth and Output Gaps for Switzerland http://www.snb.ch/n/mmr/reference/working_paper_2006_10/source/working_paper_2006_10.n.pdf PDF version Kevin J. Fox Kevin J. Fox Mathias Zurlinden Mathias Zurlinden Kevin J. Fox and Mathias Zurlinden 2006 SNB Working Papers 2006-10 C43 D24 E32 http://www.snb.ch/n/mmr/reference/working_paper_2006_09/source/working_paper_2006_09.n.pdf Historically, money growth has played an important role in Swiss monetary policy, until 1999 as a target and from 2000 onwards as an indicator variable. Since the new policy framework focusses on an inflation forecast, the question arises how useful money growth is for predicting future price developments. Using Swiss data, this paper estimates a model first proposed by Gerlach (2004) for the euro area that integrates money growth in an inflation forecasting equation. This "two-pillar" Phillips curve suggests that the low-frequency component of money growth, alongside current inflation and the output gap, helps predict future inflation. These results are confirmed by an alternative money-augmented Phillips curve proposed by Neumann (2003). 2011-06-26T22:06:09+01:00 en A Two-Pillar Phillips Curve for Switzerland A Two-Pillar Phillips Curve for Switzerland 2011-06-26T22:06:09+01:00 inflation money Phillips curve Switzerland A Two-Pillar Phillips Curve for Switzerland http://www.snb.ch/n/mmr/reference/working_paper_2006_09/source/working_paper_2006_09.n.pdf PDF version Petra Gerlach-Kristen Petra Gerlach-Kristen Petra Gerlach-Kristen 2006 SNB Working Papers 2006-09 E31 E42 E5 http://www.snb.ch/n/mmr/reference/working_paper_2006_08/source/working_paper_2006_08.n.pdf Market data, such as bond spreads or equity price volatility, are a complementary source to bank supervisory information. In Switzerland, meaningful market data are available for a number of banks which constitute a major part of the banking system. Notwithstanding some limitations (biases due to state guarantee for cantonal banks and potential "too-big-to-fail" expectations for big banks) these market data are likely to play a supervisory role in the future. However, once the market expects supervisors to react to market data, these data become endogenous. This may jeopardize the very potential of market data to serve as policy guides. 2011-06-26T22:06:08+01:00 en Can bank supervisors rely on market data? A critical assessment from a Swiss perspective Can bank supervisors rely on market data? A critical assessment from a Swiss perspective 2011-06-26T22:06:08+01:00 bank-supervision Can bank supervisors rely on market data? A critical assessment from a Swiss perspective http://www.snb.ch/n/mmr/reference/working_paper_2006_08/source/working_paper_2006_08.n.pdf PDF version Urs W. Birchler Urs W. Birchler Matteo Facchinetti Matteo Facchinetti Urs W. Birchler and Matteo Facchinetti 2006 SNB Working Papers 2006-08 G28 http://www.snb.ch/n/mmr/reference/working_paper_2006_07/source/working_paper_2006_07.n.pdf Using U.S. and euro area data, this paper presents a significant and proportional relationship between money growth and subsequent inflation when accounting for equilibrium velocity movements due to inflation regimes changes. These movements, driven by money demand adjustments to low-frequency Fisherian interest rate variations, are derived from consistent U.S. and euro area money demand specifications - after contradictory coexisting results are explained. Not accounting for equilibrium velocity and interest rate movements biases cross-country and time series dynamic money growth / inflation estimated relationships, and leads to the non-proportional, non-significant, and reverse causality results found in studies that include the post-1980 period. 2011-06-26T22:06:07+01:00 en Money and the Great Disinflation Money and the Great Disinflation 2011-06-26T22:06:07+01:00 money growth inflation equilibrium velocity quantity theory money demand Money and the Great Disinflation http://www.snb.ch/n/mmr/reference/working_paper_2006_07/source/working_paper_2006_07.n.pdf PDF version Samuel Reynard Samuel Reynard Samuel Reynard 2006 SNB Working Papers 2006-07 E52 E58 E41 E31 http://www.snb.ch/n/mmr/reference/working_paper_2006_06/source/working_paper_2006_06.n.pdf This paper analyzes the pass-through from import prices to CPI inflation in real time. Our strategy follows an event-study approach, which compares inflation forecasts before and after import price releases. Inflation forecasts are modelled using a dynamic factor procedure that relies on daily panels of Swiss data. We find strong evidence that monthly import price releases provide important information for CPI inflation forecasts and that the behavior of updated forecasts is consistent with a time-varying pass-through. The robustness of this latter result is underpinned in two ways: an alternative CPI measure that excludes price components subject to administered pricing and panels capturing different levels of information breadth. Besides implying a time-varying pass-through, our empirical findings cast doubt on a prominent role of sticky prices for the low pass-through findings. 2011-06-26T22:06:06+01:00 en Time-Varying Pass-Through from Import Prices to Consumer Prices: Evidence from an Event Study with Real-Time Data Time-Varying Pass-Through from Import Prices to Consumer Prices: Evidence from an Event Study with Real-Time Data 2011-06-26T22:06:06+01:00 Common Factors Pass-Through Daily Panels Time-Varying Pass-Through from Import Prices to Consumer Prices: Evidence from an Event Study with Real-Time Data http://www.snb.ch/n/mmr/reference/working_paper_2006_06/source/working_paper_2006_06.n.pdf PDF version Marlene Amstad Marlene Amstad Andreas M. Fischer Andreas M. Fischer Marlene Amstad and Andreas M. Fischer 2006 SNB Working Papers 2006-06 E52 E58 http://www.snb.ch/n/mmr/reference/working_paper_2006_05/source/working_paper_2006_05.n.pdf While monetary targeting has become increasingly rare, many central banks attach weight to money growth in setting interest rates. This raises the issue of how money can be combined with other variables, in particular the output gap, when analysing inflation. The Swiss National Bank emphasises that the indicators it uses to do so vary across forecasting horizons. While real indicators are employed for short-run forecasts, money growth is more important at longer horizons. Using band spectral regressions and causality tests in the frequency domain, we show that this interpretation of the inflation process fits the data well. 2011-06-26T22:06:05+01:00 en Money Growth, Output Gaps and Inflation at Low and High Frequency: Spectral Estimates for Switzerland Money Growth, Output Gaps and Inflation at Low and High Frequency: Spectral Estimates for Switzerland 2011-06-26T22:06:05+01:00 spectral regression frequency domain Phillips curve quantity theory Money Growth, Output Gaps and Inflation at Low and High Frequency: Spectral Estimates for Switzerland http://www.snb.ch/n/mmr/reference/working_paper_2006_05/source/working_paper_2006_05.n.pdf PDF version Katrin Assenmacher-Wesche Katrin Assenmacher-Wesche Stefan Gerlach Stefan Gerlach Katrin Assenmacher-Wesche and Stefan Gerlach 2006 SNB Working Papers 2006-05 C22 E3 E5 http://www.snb.ch/n/mmr/reference/working_paper_2006_04/source/working_paper_2006_04.n.pdf Assessing financial stability is an issue of rapidly growing importance to central banks and banking authorities. This paper explores an extensive panel data set of Swiss banks to identify macroeconomic influencing factors on bank profitability and to quantify their impact on bank capitalization. We find evidence of a significant effect of various macroeconomic variables as e.g. real growth or interest rate shocks on bank earnings. However, our results suggest that the Swiss banking system is quite robust against macroeconomic shocks. Only a joint occurrence of a recession, rising interest rates and falling stock prices would lead to substantial losses in the Swiss banking industry. 2011-06-26T22:06:04+01:00 en The Exposure of Swiss Banks to Macroeconomic Shocks - an Empirical Investigation The Exposure of Swiss Banks to Macroeconomic Shocks - an Empirical Investigation 2011-06-26T22:06:04+01:00 banking macroeconomic shocks stress tests credit risk interestrate risk Switzerland The Exposure of Swiss Banks to Macroeconomic Shocks - an Empirical Investigation http://www.snb.ch/n/mmr/reference/working_paper_2006_04/source/working_paper_2006_04.n.pdf PDF version Hansjörg Lehmann Hansjörg Lehmann Michael Manz Michael Manz Hansjörg Lehmann and Michael Manz 2006 SNB Working Papers 2006-04 G21 E44 C33 http://www.snb.ch/n/mmr/reference/working_paper_2006_03/source/working_paper_2006_03.n.pdf This paper examines the impact of credit reporting on the repayment behavior of borrowers. We implement an experimental credit market in which loan repayment is not third-party enforceable. We then compare market outcome with a public credit registry to that without a credit registry. This experiment is conducted for two market environments: first, a market in which repeat interaction between borrowers and lenders is not feasible and, second, a market in which borrowers and lenders can choose to trade repeatedly with each other. In the market without repeat interaction the credit market collapses without a credit registry, as lenders rightly fear that borrowers will default. The introduction of a registry in this environment significantly raises repayment rates and the credit volume extended by lenders. When repeat transactions are possible a credit registry is not necessary to sustain high market performance as relationship banking enforces repayment even when lenders cannot share information. In this environment credit reporting has little impact on market efficiency, it does however affect trading structure and distribution. The presence of a credit registry leads to fewer banking relationships and reduces the ability of lenders to extract rents from such relationships. 2011-06-26T22:06:03+01:00 en Credit Reporting, Relationship Banking, and Loan Repayment Credit Reporting, Relationship Banking, and Loan Repayment 2011-06-26T22:06:03+01:00 Credit Market Information Sharing Relationship Banking Credit Reporting, Relationship Banking, and Loan Repayment http://www.snb.ch/n/mmr/reference/working_paper_2006_03/source/working_paper_2006_03.n.pdf PDF version Martin Brown Martin Brown Christian Zehnder Christian Zehnder Martin Brown and Christian Zehnder 2006 SNB Working Papers 2006-03 G21 G28 D82 http://www.snb.ch/n/mmr/reference/economic_studies_2006_02/source/economic_studies_2006_02.n.pdf A procedure that has been used at the Swiss National Bank for selecting vector-autoregressive (VAR) models in order to forecast Swiss consumer price inflation is presented. In order to examine and improve the quality of the procedure, it is submitted to several modifications and the results are compared with one another. Combining forecasts substantially improves the quality of the forecasts. Models specified with respect to levels of variables are superior to those specified with respect to differences in variables. Bank loans and the monetary aggregate M3 are the most important variables for inflation forecasting. The optimized procedure reduces the root mean squared error (RMSE) of the inflation forecast to one third of the RMSE of a naive "no change" forecast over the period from 1987 to 2005. 2011-06-26T22:06:02+01:00 en Forecasting Swiss inflation using VAR models Forecasting Swiss inflation using VAR models 2011-06-26T22:06:02+01:00 Inflation forecasting VAR models model selection model evaluation Forecasting Swiss inflation using VAR models http://www.snb.ch/n/mmr/reference/economic_studies_2006_02/source/economic_studies_2006_02.n.pdf PDF version Caesar Lack Caesar Lack Caesar Lack 2006 SNB Economic Studies 2006-02 C32 C52 C53 E37 http://www.snb.ch/n/mmr/reference/working_paper_2006_02/source/working_paper_2006_02.n.pdf We investigate the effects of macroeconomic announcements on the realized correlation between bond and stock returns. Our results deliver insights into the dominating drivers of bond-stock comovements. We find that it is not so much the surprise component of the announcement, but the mere fact that an announcement occurs that influences the realized bond-stock correlation. The impact of macroeconomic announcements varies across the business cycle. Announcement effects are highly dependent on the sign of the realized bond-stock correlation which has recently gone from positive to negative. Macroeconomic announcement effects on realized bond and stock volatilities are also investigated. 2011-06-26T22:06:02+01:00 en Realized Bond-Stock Correlation: Macroeconomic Announcement Effects Realized Bond-Stock Correlation: Macroeconomic Announcement Effects 2011-06-26T22:06:02+01:00 Bond-stock correlation Macroeconomic announcements Realized correlation Realized volatility Realized Bond-Stock Correlation: Macroeconomic Announcement Effects http://www.snb.ch/n/mmr/reference/working_paper_2006_02/source/working_paper_2006_02.n.pdf PDF version Charlotte Christiansen Charlotte Christiansen Angelo Ranaldo Angelo Ranaldo Charlotte Christiansen and Angelo Ranaldo 2006 SNB Working Papers 2006-02 G12 G13 G14 http://www.snb.ch/n/mmr/reference/working_paper_2006_01/source/working_paper_2006_01.n.pdf Recent time-series evidence has re-confirmed the forecasting ability of Swiss broad money. The same money demand studies and others, however, find that the income elasticity is greater than one. Such parameter estimates are difficult to reconcile with transactions demand theory. This study re-examines the estimates for income elasticity in money demand based on cross-regional evidence for Switzerland. Particular attention is given to the influence of regional financial sophistication. The cross-cantonal results find that the income elasticity lies between 0.4 and 0.6. This discrepancy between the two empirical methodologies has important consequences for the conduct of Swiss monetary policy. 2011-06-26T22:06:01+01:00 en Measuring Income Elasticity for Swiss Money Demand: What do the Cantons say about Financial Innovation? Measuring Income Elasticity for Swiss Money Demand: What do the Cantons say about Financial Innovation? 2011-06-26T22:06:01+01:00 Money Demand Cross-Regional Estimates Regional Financial Sophistication Measuring Income Elasticity for Swiss Money Demand: What do the Cantons say about Financial Innovation? http://www.snb.ch/n/mmr/reference/working_paper_2006_01/source/working_paper_2006_01.n.pdf PDF version Andreas M. Fischer Andreas M. Fischer Andreas M. Fischer 2006 SNB Working Papers 2006-01 C21 E41 E50 http://www.snb.ch/n/mmr/reference/working_paper_2005_02/source/working_paper_2005_02.n.pdf Newswire reports have become an accepted tool for empirical studies analyzing informational asymmetries in FX markets. This paper tests the accuracy of such reports for Swiss interventions in the foreign exchange market. The evidence finds that the time stamp of the reports does not always lie near the recorded time of the first intervention trade as is commonly assumed in market microstructure studies. The standard deviation of the time difference is measured in hours and not in minutes. These and other regression results question the accuracy of newswire reports for Swiss interventions. 2011-06-26T22:05:02+01:00 en On the Inadequacy of Newswire Reports for Empirical Research on Foreign Exchange Interventions On the Inadequacy of Newswire Reports for Empirical Research on Foreign Exchange Interventions 2011-06-26T22:05:02+01:00 Central Bank Interventions Intra-Daily Data Newswire Reports On the Inadequacy of Newswire Reports for Empirical Research on Foreign Exchange Interventions http://www.snb.ch/n/mmr/reference/working_paper_2005_02/source/working_paper_2005_02.n.pdf PDF version Andreas M. Fischer Andreas M. Fischer Andreas M. Fischer 2005 SNB Working Papers 2005-02 F31 F33 http://www.snb.ch/n/mmr/reference/economic_studies_2005_01/source/economic_studies_2005_01.n.pdf Studies on the role of the credit channel have flourished in recent years. This paper focuses on the work that has been carried out using Swiss data. It begins with some general features characterizing the credit channel and demonstrating its empirical implications. It then provides an overview of the empirical papers. For the most part, these papers test cross-sectional implications of the credit view. The overall evidence suggests that a credit channel exists but a precise assessment of the effects of monetary policy operating through this channel is still a long way off. Much work has yet to be done, not least on the data side, in order to obtain a clear view of the quantitative importance of the credit channel for Switzerland. 2011-06-26T22:05:01+01:00 en Credit in the monetary transmission mechanism: An overview of some recent research using Swiss data Credit in the monetary transmission mechanism: An overview of some recent research using Swiss data 2011-06-26T22:05:01+01:00 Monetary transmission credit channel Credit in the monetary transmission mechanism: An overview of some recent research using Swiss data http://www.snb.ch/n/mmr/reference/economic_studies_2005_01/source/economic_studies_2005_01.n.pdf PDF version Mathias Zurlinden Mathias Zurlinden Mathias Zurlinden 2003 SNB Economic Studies 2005-01 E44 E51 E52 http://www.snb.ch/n/mmr/reference/working_paper_2005_01/source/working_paper_2005_01.n.pdf This paper is related to a large recent literature studying the Phillips curve in sticky-price equilibrium models. It differs in allowing for the degree of price stickiness to be determined endogenously. A closed-form solution for short-term inflation is derived from the dynamic stochastic general equilibrium (DSGE) model with state-dependent pricing originallydev eloped byDotsey , King and Wolman. This generalised Phillips curve encompasses the New Keynesian Phillips curve (NKPC) based on Calvo-type price-setting as a special case. It describes current inflation as a function of lagged inflation, expected future inflation, and current and expected future real marginal costs. The paper demonstrates that inflation dynamics generated bythe model for a broad class of time and state-dependent price-setting behaviours are well approximated bythe popular hybrid NKPC (with one lag of inflation) in a low-inflation environment. This provides an explanation of whythe hybrid NKPC performs well in describing inflation dynamics across industrial countries. It implies, however, that the reduced-form coefficients of the hybrid NKPC maynot have a structural interpretation. 2011-06-26T22:05:01+01:00 en The Phillips curve under state-dependent pricing The Phillips curve under state-dependent pricing 2011-06-26T22:05:01+01:00 State-dependent pricing inflation dynamics Phillips curve The Phillips curve under state-dependent pricing http://www.snb.ch/n/mmr/reference/working_paper_2005_01/source/working_paper_2005_01.n.pdf PDF version Hasan Bakhshi Hasan Bakhshi Hashmat Khan Hashmat Khan Barbara Rudolf Barbara Rudolf Hasan Bakhshi, Hashmat Khan and Barbara Rudolf 2005 SNB Working Papers 2005-01 E31 E32 http://www.snb.ch/n/mmr/reference/working_paper_2004_02/source/working_paper_2004_02.n.pdf We provide evidence that a bank's subordinated debt yield spread is not, by itself, a sufficient measure of default risk. We use a model in which subordinated debt is held by investors with superior knowledge (informed investor). First, we show that in theory the yield spread on subordinated debt must compensate investors for expected loss plus give them an incentive not to prefer senior debt. Second we present strong empirical evidence in favor of the informed investor hypothesis and of the existence of the incentive premium predicted by the model. Using data on the timing and pricing of public debt issues made by large U.S. banking organizations during the 1985-2002 period, we find that banks issue relatively more subordinated debt in good times, i.e. when informed investors have good news. Spreads at issuance (corrected for sample selection bias) react to (superior) private and to public information, in line with the comparative statics of the postulated incentive premium. Interestingly, as the model predicts, the influence of sophisticated investors' information on the subordinated yield spread became weaker after the introduction of prompt corrective action and depositor preference reforms, while the influence of public risk perception grew stronger. Finally, our model explains anomalies from the empirical literature on subordinated debt spreads and from market interviews (e.g. limited sensitivity to bank-specific risk and the ballooning of spreads in bad times). We conclude that a bank's subordinated yield spread conveys important information if interpreted together with its senior spread and with other banks' subordinated yield spreads. 2011-06-26T22:04:02+01:00 en What Does the Yield on Subordinated Bank Debt Measure? What Does the Yield on Subordinated Bank Debt Measure? 2011-06-26T22:04:02+01:00 market discipline subordinated debt bank supervision What Does the Yield on Subordinated Bank Debt Measure? http://www.snb.ch/n/mmr/reference/working_paper_2004_02/source/working_paper_2004_02.n.pdf PDF version Hancock Diana Hancock Diana Urs W. Birchler Urs W. Birchler Hancock Diana and Urs W. Birchler 2004 SNB Working Papers 2004-02 D8 G2 K2 http://www.snb.ch/n/mmr/reference/working_paper_2004_01/source/working_paper_2004_01.n.pdf This paper uses multi-period cross-sectional data on financial assets holdings to shed light on the postwar stability of money demand in the United States. I first present a new measure of the evolution of financial market participation, by relating participation to the extensive margins of money demand, and quantify the influence of wealth on participation decisions. I then relate the increase in participation to the period of "missing money" and to the subsequent higher interest rate elasticity of monetary aggregates. The paper indicates that time series estimations of money demand relationships are inherently flawed and tend to inappropriately suggest instability. 2011-06-26T22:04:01+01:00 en Financial Market Participation and the Apparent Instability of Money Demand Financial Market Participation and the Apparent Instability of Money Demand 2011-06-26T22:04:01+01:00 Demand Financial Market Participation Cross-Sections Financial Market Participation and the Apparent Instability of Money Demand http://www.snb.ch/n/mmr/reference/working_paper_2004_01/source/working_paper_2004_01.n.pdf PDF version Samuel Reynard Samuel Reynard Samuel Reynard 2004 SNB Working Papers 2004-01 E41 E44 G11