The Success of Currency Reforms to End Great Inflations: An Empirical Analysis of 34 High Inflations

The estimation of an ordered probit model for currency reforms trying to end 31 hyperinflations and three big inflations of the 20th century shows that the introduction of an independent central bank and the adoption of a credibly fixed exchange rate are crucial for the success of a currency reform. In addition, currency reforms are demonstrated to be more difficult in centrally planned economies than in market economies.Great inflations, currency reforms, central bank independence, fixed exchange rate

The Price Revolution in the 16th Century: Empirical Results from a Structural Vectorautoregression Model

This paper provides empirical evidence in favor of the hypothesis that the secular price increase in the 16th century is mainly caused by money supply developments as the discovery of new mines in Latin America. First we review price developments for several European countries over the 16th century in the light of this hypothesis. Second the application of a SVAR model to annual time series of price indexes for Old Castile and Leon and New Castile over the 16th century indicates that not only the trend but also the short to medium variability of price movements in 16th century Spain are dominated by permanent money supply shocks.Price revolution, money demand, money supply

Deflation and relative prices : evidence from Japan and Hong Kong

We test the menu cost model of Ball and Mankiw (1994, 1995), which implies that the impact of price dispersion on inflation should differ between inflation and deflation episodes, using data for Japan and Hong Kong. We use a random cross-section sample split when calculating the moments of the distribution of price changes to mitigate the small-cross-sectionsample bias noted by Cecchetti and Bryan (1999). The parameter on the third moment is positive and significant in both countries during both the inflation and deflation periods, and the parameter on the second moment changes sign in the deflation period, as the theory predicts. Keywords: inflation, deflation, menu costs, Hong Kong, Japan JEL Numbers: E3

International Portfolio Holdings and Swiss Franc Asset Returns

Portfolio Choice, Asset Returns, Switzerland

Parker, Wine Spectator and Retail Prices of Bordeaux Wines in Switzerland: Results from Panel Data 1995 - 2000

This paper considers the effect of Parker and Wine Spectator ratings on Swiss retail prices of the grand cru classé of Médoc , Graves and St Emilion as well as the most renowned wines of Pomerol in a panel data setting. The application of a two-way fixed effects regression model to data of the vintages 1995 to 2000 of 121 wines leads to the following conclusions: There is clear evidence that WS ratings do not provide additional information for retail prices when we take into account the fixed effects and the Parker ratings. The evidence of a marginal effect of Parker ratings on Bordeaux prices is mixed. We find it for five of the nine appellations, in particular for Paulliac and Pomerol where a one Parker point increase is estimated to lead to a 6-7% price increase. This “only” partial price influence of Parker is confirmed by comparing the estimated “chateau” fixed effects for the Médoc estates with their standing in the “old” 1855 classification and the most recent Parker classification of 2008

Why are Returns on Swiss Franc Asset so Low?

As is well known, the uncovered interest rate parity fails in the short run but usually holds in the long run. This paper analyses the long and short run interest rate parity of 10 mayor OECD currencies and finds that there is a long run failure of the uncovered interest rate parity condition for the Swiss Franc. After correcting for exchange rate changes, mean returns on Swiss assets have been significantly lower than in other currencies, an anomaly not found in any other major currency. The long run return differential has been stable over the last 20 years, transitory structural breaks are only found in times of currency turmoil. We suggest that the return anomaly may be due to an insurance premium against very rare catastrophic events, such as a major war. Supporting evidence for this hypothesis comes from two empirical findings: First, we show that the return differential is negatively affected by large unexpected geo-political events. Second we examine historical data on interest rates differentials and show that the abnormally low level of Swiss returns arises after the first world war only.

The Short-Run Impact of Interest Rates on Exchange Rates: Results for the Swiss franc Against the Euro and US Dollar from Daily Data 2001-2011

This paper provides an econometric analysis of the short-run impact of interest rates on the Swiss franc exchange rate covering the period January 2001 to June 2011 using daily data. Our model includes both the exchange rate of the Swiss franc against euro and dollar and uses the plausible assumption that foreign interest rates and the euro-dollar exchange rate are exogenous. In addition, we consider not only money market interest differentials, but also those for 2 and 10 year governments bonds. GMM estimation indicates that a one-percentage point increase in the 3-month Swiss franc Libor rate leads to a 3.7 % appreciation of the Swiss franc against euro and dollar. This result seems to be robust with respect to considering only increasing or decreasing interest rates and omitting data around SNB target band adjustments. Our findings appear reasonable and are between the extremely low and high estimates of the impact of Swiss interest rate changes on the exchange rate reported in the literature

The Short-Run Impact of SNB Sight Deposits on Exchange Rates: Results from Weekly Data 2015 - 2018

This paper provides an econometric analysis of the short-run impact of SNB sight deposits mainly created by intervention on the Swiss franc exchange rate covering the period January 2015 to June 2018 using weekly data. Our model includes both the exchange rate of the Swiss franc against euro and dollar and uses the plausible assumption that foreign interest rates and the euro-dollar exchange rate are exogenous. Besides sight, deposits we include interest rate differentials for 2- and 10-year government bonds, and some exogenous exchange rate determinants. GMM estimation indicates that a one percent increase in the sight deposits leads leads to a 0.41 percent appreciation of the Swiss franc against euro and dollar