The speed of exchange rate pass-through

Barthélémy Bonadio, Andreas M. Fischer and Philip Sauré

Issue
2018-05

Pages
93

JEL classification
F14, F31, F41

Keywords
Daily exchange rate pass-through, speed, large exchange rate shock

Year
2018

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