This economic study presents and analyses newly collected real-time data for Swiss GDP. It extends existing data sets by covering annual and quarterly aggregate GDP values for a longer sample, with vintages starting in 1971 (annual) and 1983 (quarterly). The analysis comprises a graphical and statistical description of quarterly GDP releases and tests for unbiasedness and efficiency of the revisions. Overall, revisions can be large and substantial, and early releases tend to underestimate GDP growth. Yet statistical tests on unbiasedness provide only limited evidence for a statistically significant bias. Additional tests point at some degree of informational inefficiency for selected revisions, and show that absolute revisions neither improve nor deteriorate over time. Most findings are consistent with existing literature. However, a closer look at revisions during the mid-nineties, a period characterised by large revisions, shows that annual and benchmark revisions can affect quarterly revisions considerably (and thus the results above). In addition, this closer look illustrates the difficulties with interpreting the recent business cycle in the presence of revisions.
This paper analyses the liquidity management game played in payment systems with free but collateralised intraday credit facilities, under the assumption that settlement risk is the driving force. Settlement equilibria are found to depend on the combination of the intraday liquidity facilities' design and the collateral policy applied by the central bank. The effectiveness of a two-part tariff in coordinating on early settlement depends on the same factors. Model predictions are consistent with stylised facts from a comparison of settlement behaviour in the Swiss Interbank Clearing and Fedwire funds.
We demonstrate empirically that not all international capital flows influence exchange rates equally. Capital flows induced by foreign investors' transactions in local stock markets have an impact on exchange rates that is both economically significant and permanent, whereas capital flows induced by foreign investors' transactions in the local government bond market do not. We relate the differences in the price impacts of capital flows to differences in the amounts of private information conveyed by these flows. Our empirical findings are based on novel, daily-frequency datasets on prices and quantities of all transactions undertaken by foreign investors in the stock, bond, and onshore FX markets of Thailand.
This paper highlights a novel mechanism that generates global imbalances. It develops a general equilibrium trade model with one of two countries having a comparative advantage in a sector whose production is characterized by (i) rapid, anticipated demand growth and (ii) large up-front R&D costs. International funding of the accruing R&D costs generates capital inflows in the R&D stage, which are balanced by subsequent outflows. Importantly, sector-level growth does not generate growth differentials between countries, typically regarded as rationales of global imbalances. Additionally, it is shown that a trade surplus can coincide with appreciations of the real exchange rate. I argue that Switzerland's trades surplus, which was driven to record heights during 2010-2014 by pharmaceutical exports, exemplifies this mechanism. Calibrating the model to Swisstrade flows underpins this argument.
We conducted a simple, anonymous survey at the beginning of 2014, asking around 200 economists worldwide to reveal their inflation expectations, conditional on either Ben Bernanke or Janet Yellen being the chair of the Board of Governors of the Federal Reserve. We use the change in the Fed's leadership to focus attention on the difference in conditional expectations, while we are interested in the distribution of those expectations. The outcome of the survey shows that a significant share of respondents revealed asymmetric inflation expectations and that the deviation from symmetry is sizeable. Nonetheless, individual asymmetry in forecasts appears to be irrelevant for the aggregate distribution, as the number of respondents who factor in excess inflation broadly matches the number of those who gave more weight to disinflationary outcomes. The aggregate distribution we obtain is largely comparable to the outcome of the Survey of Professional Forecasters for the first quarter of 2014.
How can a central bank control interest rates in an environment with large excess reserves? In this paper, we develop a dynamic general equilibrium model of a secured money market and calibrate it to the Swiss franc repo market to study this question. The theoretical model allows us to identify the factors that determine demand and supply of central bank reserves, the money market rate and trading activity in the money market. In addition, we simulate various instruments that a central bank can use to exit from unconventional monetary policy. These instruments are assessed with respect to the central bank's ability to control the money market rate, their impact on the trading activity and the operational costs of an exit. All exit instruments allow central banks to attain an interest rate target. However, the trading activity differs significantly among the instruments and central bank bills and reverse repos are the most cost-effective.
This paper shows that standard multifactor asset pricing models provide an adequate description of excess returns on stock indexes of German industrial sectors. The only exception is the banking sector index. It offers lower monthly excess returns than suggested by exposures to risk factors in the sample period from 1973 to 2014. This evidence is robust to various changes in the specification of the empirical model. Rolling time window regressions highlight that this finding has been most pronounced since the peak of the global financial crisis in 2008/2009 when the government guarantee for big, systemically important German banks became explicit.
This paper investigates the impact of international swap lines on stock returns using data from banks in emerging markets. The analysis shows that swap lines by the Swiss National Bank (SNB) had a positive impact on bank stocks in Central and Eastern Europe. It then highlights the importance of individual bank characteristics in identifying the impact of swap lines on bank stocks. Bank-level evidence suggests that stock prices of local and less-well capitalized banks responded strongly to SNB swap lines. This new evidence is consistent with the view that swap lines not only enhanced market liquidity but also reduced risks associated with micro-prudential issues.
We argue that the issuance of central bank reserves per se can matter for the effectof central bank large-scale asset purchases-commonly known as quantitative easing- on long-term interest rates. This effect is independent of the assets purchased, and runs through a reserve-induced portfolio balance channel. For evidence we analyze the reaction of Swiss long-term government bond yields to announcements by the Swiss National Bank to expand central bank reserves without acquiring any long-lived securities. We find that declines in long-term yields following the announcements mainly reflected reduced term premiums suggestive of reserve-induced portfolio balance effects.
Mortgage arrears arise if a household faces affordability problems and/or is in negative equity. Because widespread arrears pose a risk to the stability of banks and limit households' future access to credit, a crucial question is how monetary or macroprudential policies influence their incidence. We use a European household data set to analyse what drives arrears and find that affordability problems, such as unemployment, low income and high mortgage payments, matter, which suggests that monetary policy has an impact. Households facing the dual trigger of affordability problems and negative equity are more likely to go into longer-term arrears; macroprudential regulation preventing high loan-to-value (LTV) ratios can thus also have an impact.
