Template-type: ReDIF-Paper 1.0
Author-Name: Laura Felber
Author-Name-First: Laura
Author-Name-Last: Felber
Author-Person: pfe607
Title: Exchange rates and cross-border consumer spending: Evidence from retail payments data
Abstract: This paper examines the effects of exchange rate fluctuations on cross-border consumer spending in small open economies. Exploiting a large, unexpected and persistent central bank-induced exchange rate appreciation and drawing on a unique dataset of over 500 million anonymized debit and credit card transactions, I document a substantial and immediate impact on both cross-border shopping by domestic consumers and tourism spending by foreign consumers. The strongest spending adjustments are observed among domestic consumers living near the border and foreign consumers from neighboring countries. Furthermore, foreign consumers from neighboring countries exhibit high exchange rate sensitivity on both the extensive and intensive margins and shift their consumption from higher- to lower-value goods and services. These findings suggest significant substitution effects in consumption on impact and emphasize the important role of cross-border shopping in small open economies. The paper provides insights for policymakers and central bankers, especially in small open economies where the exchange rate channel is an important channel of monetary policy transmission.

Length: 74 pages
Creation-Date: 2025
Contact-Email: forschung@snb.ch
File-URL: https://www.snb.ch/en/publications/research/working-papers/2025/working_paper_2025_09
File-Format: text/html
Number: 2025-09
Classification-JEL: D12, E21, E52, E58, F14, F41, R11, Z30
Keywords: Exchange rates, Consumption, Monetary policy, Exchange rate channel, Heterogeneity, Transaction payments data, Tourism, Event study
Handle: RePEc:snb:snbwpa:2025-09