Swiss Trade During the COVID-19 Pandemic: An Early Appraisal

This study uses trade data from Switzerland's Federal Customs Administration to examine the impact of COVID-19 on international goods trade between January and July 2020. We show that Swiss trade during that period fell by 11% compared to 2019, and that the contraction following the “Federal Lockdown” in mid-March was considerably steeper than the Swiss trade collapse in the aftermath of the Lehman Brothers bankruptcy in September 2008. Exploiting country variation in the spread of COVID-19, the stringency of containment measures, and Swiss trade flows, we document that the pandemic adversely affected both the demand and supply side of foreign trade. We discuss several channels at work and show that our COVID-19 measures are correlated with country-specific consumer and producer confidence series, which explain considerable heterogeneity in the observed trade dynamics

International Evidence on Time-Variation in Trend Labor Productivity Growth

This paper provides international evidence on time-variation in trend productivity growth, based on the dataset for hours worked constructed by Ohanian & Raffo (2012). Applying both the endogenous break tests of Bai & Perron (1998, 2003) and the Stock & Watson (1996, 1998) TVP-MUB methodology, substantial evidence of time-variation in trend productivity growth is detected for most countries. For either Japan, or countries belonging to the Eurozone, evidence points towards a significant growth decline over the last several decades. Weaker evidence is reported for the United States, for which the 1990’s productivity acceleration is estimated to have been overall mild, and of a temporary nature

Floating or fixed exchange rates: The role of government size

This paper contributes to the ongoing debate on the reform of the international monetary system by evaluating the net welfare gains of monetary policies with flexible exchange rates over a fixed exchange rate as a function of a country’s public sector size. The argument goes back to Anna Schwartz (2000), who linked the role of government size to the viability of a fixed exchange rate regime, as a response to reform plans of the international monetary system by the Bretton Woods Commission (1994). Using a standard New Keynesian small open economy model to quantify this conjecture, three main results emerge: (1) The net welfare gains are increasing in government size; (2) The optimal simple Taylor rule attains a non-negligible role to stabilizing fluctuations in the nominal exchange rate; (3) Increasing public sector size reduces output variability irrespective of the exchange rate policy

Economic Openness and Fiscal Multipliers

Recent empirical findings attribute a central role to the degree of economic openness to determine the size of the fiscal multiplier. See for instance Ilzetzki, Mendoza & Végh (2013). However, traditional macroeconomic models have difficulties to account for this evidence. By introducing ‘deep-habit’ formation into a New Keynesian small open economy model, this paper provides a theoretical framework which is able to attest for the new empirical evidence. Deep habits give rise to counter-cyclical firm markups, which are crucial to generate effects of openness on the fiscal multiplier as found in the data. We study three dimensions of economic openness: Exchange rate flexibility, trade openness and capital mobility. In line with the empirical findings, we report a negative relationship between measures of economic openness and the fiscal multiplier

Swiss trade during the COVID-19 pandemic: an early appraisal

This study uses trade data from Switzerland’s Federal Customs Administration to examine the impact of COVID-19 on international goods trade between January and July 2020. We show that Swiss trade during that period fell by 11% compared to 2019 and that the contraction following the “Federal Lockdown” in mid-March was considerably steeper than the Swiss trade collapse in the aftermath of the Lehman Brothers bankruptcy in September 2008. Examining cross-country variation in COVID-19 cases, the stringency of containment measures, and Swiss trade flows, we document that the pandemic adversely affected both the demand and supply side of foreign trade, while trade restrictions and exchange rate fluctuations played no major role behind the rapid decline of Swiss trade in the first half of 2020

Economic openness and fiscal multipliers

Recent empirical findings attribute a central role to the degree of economic openness to determine the size of the fiscal multiplier. See, for instance, Ilzetzki et al. (2013) [How big (small?) are fiscal multipliers? Journal of Monetary Economics, 60(2), 239–254]. However, traditional macroeconomic models have difficulties to account for this evidence. By introducing ‘deep-habit’ formation into a New Keynesian small open economy model, this paper provides a theoretical framework which is able to attest for the new empirical evidence. Deep habits give rise to counter-cyclical firm markups, which are crucial to generate effects of openness on the fiscal multiplier as found in the data. We study three dimensions of economic openness: exchange rate flexibility, trade openness, and capital mobility. In line with the empirical findings, we report a negative relationship between measures of economic openness and the fiscal multiplier

Swiss Trade During the COVID-19 Pandemic: An Early Appraisal

This study uses trade data from Switzerland's Federal Customs Administration to examine the impact of COVID-19 on international goods trade between January and July 2020. We show that Swiss trade during that period fell by 11% compared to 2019, and that the contraction following the “Federal Lockdown” in mid-March was considerably steeper than the Swiss trade collapse in the aftermath of the Lehman Brothers bankruptcy in September 2008. Exploiting country variation in the spread of COVID-19, the stringency of containment measures, and Swiss trade flows, we document that the pandemic adversely affected both the demand and supply side of foreign trade. We discuss several channels at work and show that our COVID-19 measures are correlated with country-specific consumer and producer confidence series, which explain considerable heterogeneity in the observed trade dynamics