Determinants of the Swiss Franc Real Exchange Rate

Griffoli, Tommaso Mancini; Meyer, Christoph O.; Natal, Jean-Marc; Zanetti, Attilio

doi:10.1007/bf03399419

Cited by 10 publications

(5 citation statements)

References 23 publications

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“…As in Gubler and Sax (2011), Fischer and Hossfeld (2014) and Mancini Griffoli et al (2015, the dependent variable of our BEER model is the bilateral RER. This choice presents the advantage that the RER captures relative prices in a cleaner fashion than the REER, since it is unaffected by changes in trade weights, which in turn can be endogenous to exchange rate variations as they modify the relative value of trade flows across partners.…”

Section: The Dependent Variablementioning

confidence: 99%

How frequent a BEER? Assessing the impact of data frequency on real exchange rate misalignment estimation

Giordano

2021

Scottish J Political Eco

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This paper explores the robustness of Behavioural Equilibrium Exchange Rate (BEER) models -employed to estimate real effective exchange rate (REER) deviations from "equilibrium" values consistent with macroeconomic fundamentals -to the frequency (annual vs. quarterly) of the underlying data. Indeed, data frequency influences both the length of the sample period (which is typically shorter in a quarterly model) and the set of relevant fundamentals to be included in the specification, and can affect the plausibility of some of the BEER modelling assumptions, which are especially restrictive at the quarterly frequency. The paper compares REER misalignment estimates stemming from a carefully specified annual model, estimated since 1980 for 55 countries, and a comparable quarterly model, estimated since 1999, which is a variant of that currently in use at the Bank of Italy (Giordano, 2018). In the overlapping period the annualised quarterly-model misalignments are quite similar to those based on the annual model. Moreover, the in-sample power of quarterly REER misalignments in explaining subsequent, actual REER developments is found to be higher than that of the annual estimates, signalling their greater usefulness in assessing a country's external economic outlook. This paper therefore confirms the robustness of the quarterly BEER model currently employed at the Bank of Italy; moreover, it suggests that the "optimal" frequency of a BEER model depends on the use (research vs. monitoring and policy-making) one makes of the resulting measures.

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Section: The Dependent Variablementioning

confidence: 99%

How frequent a BEER? Assessing the impact of data frequency on real exchange rate misalignment estimation

Giordano

2021

Scottish J Political Eco

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“…Our empirical specification considers some variables suggested by the literature as relative price determinants, among which is productivity. A well-established result in the literature is the so-called Balassa (1964)-Samuelson (1964 mechanism, which states that relatively larger increases in productivity in the traded goods sector in a country should be associated with a REER appreciation of the currency of that country (Candelon et al 2007;Galstyan and Lane 2009;Griffoli et al 2015). As far as the TOT is concerned, a common view in trade and growth theory is that it should deteriorate after a rise in the supply of domestic goods since the increased domestic supply could be absorbed by international markets at falling prices.…”

Section: Datamentioning

confidence: 99%

“…Theory suggests that a fiscal devaluation will exert its effects by affecting the TOT and the REER. However, even if an extensive literature has investigated the economic determinants of both the TOT and the REER (Corsetti et al 2007;Monacelli and Perotti 2008;Galstyan and Lane 2009;Griffoli et al 2015), only a few papers have focused on the relationship between specific taxes and relative prices (Alesina and Perotti 1995; Freund and Gagnon 2017), and little is known on the potential impact of a fiscal devaluation. Tkalec et al (2019) studied the impact of both VAT and SSCs' tax changes on the real exchange rate, but do not specifically analyse a revenue-neutral tax shift.…”

Section: Introductionmentioning

confidence: 99%

Fiscal devaluation and relative prices: evidence from the Euro area

Arachi

Assisi

2020

Int Tax Public Finance

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The theoretical literature has long recognized that a fiscal devaluation, brought about by a budget-neutral shift from social security contributions towards value added tax (V-FD), could improve price competitiveness and help restore trade imbalances, especially for countries that cannot devaluate their currency. This paper provides evidence on the effects of a fiscal devaluation on the real effective exchange rate, the terms of trade and net exports. We focus on countries that joined the Euro Area in 1999 for which fiscal devaluation is a salient issue. We find that the responses are highly heterogeneous across countries and, on average, the estimates provide only a weak support to the theoretical predictions that a fiscal devaluation could affect the real effective exchange rate and the terms of trade. Consistently, we also find negligible results on the trade balance. We conclude that the potential of a V-FD should not be overemphasized, since its effects are rather limited on both relative prices and quantities.

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“…More importantly, the significance of each factor varies among all countries in the short run. Using the annual data from 1973 to 2011 Griffoli et al (2015) investigated the determinants of Swiss franc. The main findings indicated that trade openness and the government spending are the key determinants in the long run.…”

Section: Literature Reviewmentioning

confidence: 99%

Macroeconomic fundamentals and exchange rates in South Asian economies

Draz

Ahmad

Gupta

et al. 2019

JCEFTS

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Purpose This study aims to examine the impact of macroeconomic fundamentals on exchange rates of selected South Asian economies during 1981-2013. Design/methodology/approach The authors have used two econometric approaches to the data. For the pooled sample, estimated generalized least square (EGLS) and the two-stage least square method are applied. For the panel data, the authors have used the panel generalized method of moments and ordinary least squares (OLS) methods. Findings The results suggest that macroeconomic factors have a significant impact on exchange rates. The robust findings highlight that improvements in domestic economic and political systems are crucial for a successful exchange rate policy. Originality/value The existing literature on exchange rate fundamentals have either focused on exchange rates and international trade or investigated the relationship for the developed economies. Covering a period of more than three decades, and using both pooled and panel estimations, our study is unique in terms of its focus on the South Asian economies.

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Determinants of the Swiss Franc Real Exchange Rate

Cited by 10 publications

References 23 publications

How frequent a BEER? Assessing the impact of data frequency on real exchange rate misalignment estimation

How frequent a BEER? Assessing the impact of data frequency on real exchange rate misalignment estimation

Fiscal devaluation and relative prices: evidence from the Euro area

Macroeconomic fundamentals and exchange rates in South Asian economies

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