We sketch a model that shows how skill-biased technological change may reverse the classic Balassa-Samuelson effect, leading to a negative relationship between productivity in the tradable sector and the real exchange rate. In a small open economy, export goods are produced with high-skilled...

We analyse nominal exchange rate and price dynamics after risk premium shocks with short-term interest rates constrained by the zero lower bound (ZLB). In a small-open-economy DSGE model, temporary risk premium shocks lead to shifts of the exchange rate and the price level if a central bank...

In this empirical study, we analyze the relationship between carry trade positions and some key financial as well as macroeconomic variables using a multivariate threshold model. It is often stated that the Swiss franc serves as a funding currency. We therefore focus on carry trades based on the...

This paper looks into the determinants of the Swiss franc exchange rate against the euro. Based on the monetary approach to exchange rates, we start from the premise that monetary policy has an influence on the exchange rate. To measure this effect, we apply the structural vector-autoregression...

Arbitrage normally ensures that covered interest parity (CIP) holds. Until recently, excess profits, if any, were documented to last merely seconds and reach a few pips. Instead, this paper finds that following the Lehman bankruptcy, these were large, persisted for months and involved strategies...

Momentum in foreign stock market returns is exploitable as signal of currency excess returns. Past stock market winner currencies offer higher returns than past stock market loser currencies. This finding is unrelated to interest rate differentials. Funding liquidity risk explains the time...

This paper analyzes the behavior of the Swiss franc (CHF) over the past 35 years. It relates the evolution of the CHF exchange rates to economic fundamentals like the relative competitiveness of the Swiss export sector, accumulated current accounts, interest rate differentials and oil prices....

Newswire reports have become an accepted tool for empirical studies analyzing informational asymmetries in FX markets. This paper tests the accuracy of such reports for Swiss interventions in the foreign exchange market. The evidence finds that the time stamp of the reports does not always lie...

This paper builds up an extension to the Mussa and Rosen (1978) model of quality pricing under perfect competition. Our model incorporates decreasing returns to scale. First, we predict that exchange rate shocks are imperfectly passed through into prices. Second, prices of low quality goods are...

We study high-frequency exchange rate movements over the sample 1993-2006. We document that the (Swiss) franc, euro, Japanese yen and the pound tend to appreciate against the U.S. dollar when (a) S&P has negative returns; (b) U.S. bond prices increase; and (c) when currency markets become more...