This paper explores the robustness of the Balassa-Samuelson (BS) hypothesis. We analyze an OECD country panel from 1970 to 2008 and compare three data sets on sectoral productivity, including newly constructed data on total factor productivity. Overall, our within- and between-dimension estimation results do not support the BS hypothesis. Over the last two decades, we find a robust negative relationship between productivity in the tradable sector and the real exchange rate, even after including the terms of trade to control for the deviations from the law of one price. Earlier supportive findings depend on the choice of the data set and the model specification.
We compare several methods for monitoring short-term economic developments in Switzerland. Based on a large mixed-frequency data set, the following approaches are presented and discussed: factor-based information combination approaches (including factor model versions based on the Kalman filter/smoother, a principal component based version and the three-pass regression filter), a model combination approach resting on MIDAS regression models and a model selection approach using a specific-to-general algorithm. In an out-of-sample GDP forecasting exercise, we show that the considered approaches clearly beat relevant benchmarks such as univariate time-series models and models that work with one or a small number of indicators. This suggests that a large data set is an important ingredient for successful real-time monitoring of the Swiss economy. The models using a large data set particularly outperform others during and after the Great Recession. Forecast pooling of the most-promising methods turns out to be the best option for obtaining a reliable nowcast for the Swiss economy.
Unconventional monetary policies (UMPs) by the Federal Reserve, the European Central Bank, the Bank of England and the Bank of Japan exert important spillover effects on asset prices in Switzerland if market anticipation of UMP announcements is properly accounted for. Using a broad event set and a long-term bond futures-based measure as a proxy for market anticipation of the announcements, we show that the unexpected part of those UMPs boost Swiss government and corporate bond prices, induce the CHF to appreciate, and dampen Swiss equity prices. Four extensions provide additional insights: First, the estimated effects are strongest for announcements by the ECB. Second, the impact on government bonds is largest for bonds with residual maturities of 7-10 years. Third, the impact of foreign UMP shocks on exchange rates and Swiss bond yields is less pronounced after the introduction of the EURCHF-floor by the Swiss National Bank on September 6, 2011. Fourth, the sign of spillover effects differs for positive and negative UMP surprises, but their strength does not. Our results hint at an important role played by both international portfolio re-balancing channels and international signalling channels in the transmission of foreign monetary policy shocks to Swiss asset prices.
Unconventional monetary policies (UMPs) by the Federal Reserve, the European Central Bank, the Bank of England and the Bank of Japan exert important spillover effects on asset prices in Switzerland if market anticipation of UMP announcements is properly accounted for. Using a broad event set and a long-term bond futures-based measure as a proxy for market anticipation of the announcements, we show that the unexpected part of those UMPs boost Swiss government and corporate bond prices, induce the CHF to appreciate, and dampen Swiss equity prices. Four extensions provide additional insights: First, the estimated effects are strongest for announcements by the ECB. Second, the impact on government bonds is largest for bonds with residual maturities of 7-10 years. Third, the impact of foreign UMP shocks on exchange rates and Swiss bond yields is less pronounced after the introduction of the EURCHF-floor by the Swiss National Bank on September 6, 2011. Fourth, the sign of spillover effects differs for positive and negative UMP surprises, but their strength does not. Our results hint at an important role played by both international portfolio re-balancing channels and international signalling channels in the transmission of foreign monetary policy shocks to Swiss asset prices.
This paper empirically analyses securitisation in Switzerland from a macroeconomic and bank balance sheet perspective based on a novel and near-comprehensive data set on a specific form of securitisation over the sample period from 1932 to 2014. The Swiss Pfandbrief is a distinct covered bond with a similar institutional framework as the U.S. Federal Home Loan Bank System.
