previous issues

Aussenwirtschaft: Volume 68 (2017)

Aussenwirtschaft: Volume 67 (2016)
Issue I
Issue II
Issue III

Aussenwirtschaft: Volumes 57-73 on RePEc

  • Older Volumes: Available upon request
  • Special issues of the Journal Aussenwirtschaft:
    • The European Union's New Trade Policy 
    • Decision Rules in the European Union, A Rational Choice Perspective 

    • European Integration - Between Nation and Federation 

    • International Competition rules in the GATT/ WTO System

Volume 68-I
The following articles were published in the first issue of the Aussenwirtschaft 2017.

The contribution of monetary institutions to stability
Harold James
Abstract
The modern development of a policy revolution in the late twentieth century that places monetary stability at the core of central banking functions has three roots: an academic discussion of the design of monetary policy institutions; the example of successful central banking practice; and the impact of policy spillovers in a world in which increased capital mobility shaped a new sort of globalization. The article examines the relative weight of these factors in building the modern conception of central banking, and how the three factors interact with each other. The problematical consequence of a globalization-induced change in approach is that the accidental success of modern monetary policy pushed a mode of thinking that made monetary policy central and left out traditionally central elements of central banking – in particular, financial supervision.

The contribution of monetary institutions to stability: The Swiss case
Ernst Baltensperger
Abstract
This article studies Swiss monetary policy of the 19th and 20th century to understand the Swiss Franc’s strength and stability. The continued appreciation against other currencies over the course of a century went hand-in-hand with Switzerland’s political and social consolidation as well as its increasing economic success. Political institutions arose from people’s beliefs and convictions, granting them credibility. In Switzerland, these institutions have been a major force in creating an environment that has permitted the Swiss National Bank to successfully pursue its course of monetary stability.

Money demand: A simple look at some data
Juan Pablo Nicolini
Abstract
In this paper, I offer a non-technical summary of recent research that focuses on the stability properties of real money demand. I first describe a simple workhorse model that serves as a conceptual framework for organizing the data and guiding the empirical analysis. Then, by using simple plots, I argue that the implications of the simple theory are remarkably robust over time. I do this for some developed economies with a history of relatively low inflation and for two developing economies that experienced severe hyper- inflation. Finally, we point toward several failures in this research and discuss avenues for future work.

Long-run money demand in Switzerland
Stefan Gerlach
Abstract
This paper studies long-run demand functions for Swiss M1 and M3, using annual data spanning the period 1907-2016. While the demand functions display plausible price and income elasticities, tests for structural breaks at unknown points in time detect instability in 1929 for real M1 and 1943 for real M3. This instability appears to arise from the way in which the opportunity cost is modelled. While using a single interest rate may be appropriate for M1, for M3 it would likely be helpful to take into consideration both the own return and the return on non-monetary assets.

Long-run effects of exchange rate appreciation: Another puzzle?
Marlene Amstad and Beatrice Weder di Mauro
Abstract
In the short to medium run, open economy textbook models predict that a real exchange rate appreciation shock negatively impacts macroeconomic performance. Over the long run, exchange rate appreciation and economic growth are predicted to be positively associated due to Balassa-Samuelson effects. In this case, the causality runs from growth to appreciation and exchange rate changes merely reflect underlying economic development, they are not driving them. This paper starts with a selective review of recent empirical literature, which is more ambivalent and suggests several reasons as to why the sensitivity to exchange rate appreciation shocks seems lower than predicted by theory. Reviewing the long-run association of appreciation and growth suggests that causality may also be at issue and raises another puzzle, particularly pronounced in Switzerland.

Causes and consequences of long-run currency appreciation: The Swiss case
Peter Kugler
Abstract
The econometric analysis of a panel of currencies after the transition to flexible exchange rates indicates that the real exchange rate of the Swiss franc against six major currencies is trend stationary and that the elasticity of the nominal exchange rate with respect to the relative price level is close to 1. Moreover, the dollar and pound real exchange rates appear unrelated to the GDP share of the Swiss financial sector over the years 1916-2010. This confirms previous findings for the pound and dollar for a currency panel during the flexible exchange rate period, namely, that the real appreciation of the Swiss franc in the flexible exchange rate period appears to be a “real” phenomenon not related to monetary and financial developments, and it mainly creates a risk for the stock of Swiss net foreign assets.

Currency competition in Switzerland
Michael D. Bordo
Abstract
The recent interest by many central banks in digital currency and the role of the central bank in possibly providing them and regulating them as well as the concern over privately issued crypto currencies like bitcoin, has resonance to the monetary history of many advanced countries in the early nineteenth century when multiple competing banks issued notes based on specie coins of varying quality. The currency history of Switzerland in the nineteenth century illustrates the evolution from competing banks of issue to the creation of the Swiss National bank in 1907 with a monopoly of the currency. The public good benefits of as central bank issued currency convinced the early classical economists on the basic role of central banks. Today the upsurge of privately produced crypto currencies with variable nominal and real values makes a case for the creation by central banks of their own digital currencies.

A single investor of the current account surplus? Benefits and risks of a monopoly supplier of money in Switzerland
Reto Foellmi
Abstract
Studying the currency competition episode in Switzerland of the 19th century, I argue that modern economies need a single supplier of money to pursue stabilization policy. In small open economies with integrated capital markets, the uncertainty about the real exchange poses new risks to monetary policy which were only little discussed in the previous literature.

Missing link: The case of free trade between Switzerland and Taiwan
Patrick Ziltener
Abstract
In the years after the conclusion of the Economic Cooperation Framework Agreement (ECFA) between Taiwan and the People’s Republic of China (PRC) in 2010, it became possible for countries that recognize the PRC to negotiate FTA-like economic agreements with Taiwan. Singapore and New Zealand took the lead in demonstrating that “effective economic representation” is possible “without touching upon sovereignty issues.” The Taiwanese new administration, led by Tsai Ing-wen, has confirmed its determination to make proactive use of this foreign economic policy instrument. For Switzerland, Taiwan is an economically significant missing link in its chain of FTAs in East Asia. This study assesses the potential benefits of mutual tariff abolition as part of a possible bilateral economic agreement between the WTO members Switzerland and Taiwan, taking into account the impact of the recently extended Information Technology Agreement (ITA). Taiwanese companies could envisage significant duty savings (of CHF9 million annually) in their exports to Switzerland, especially for metal goods, machinery, bicycles and motorcycles. Swiss exporters could profit even more, by up to US$47 million annually, especially for wrist watches (over $20 million), machinery and processed agricultural goods. Based on interviews with political actors, diplomats and civil servants in Taipei, the study concludes that there is a window of opportunity for Switzerland to complete its chain of FTAs in East Asia and to put an end to the (unintended) trade policy discrimination against Taiwan. There is a convergence of interests among all actors involved and there are no major obstacles for swift bilateral negotiations for the time being. Switzerland is well advised to take this chance to realize preferential market access for its companies before their main competitors in the Asia-Pacific area do the same.

A study case on the caveats in the measurement of FTAs effect on trade: Switzerland’s free trade agreements
Timothy Nussbaumer
Abstract
This paper analyses the effect of 20 of the 31 Swiss free trade agreements (FTAs) on Swiss trade flows, using disaggregated trade data for the period between 1993 and 2014. Applying the standard gravity model of trade, the impact of each individual FTA on Swiss exports and imports is estimated. Although the descriptive evidence suggests a positive impact of most FTAs, the estimation results at the disaggregated level are inconclusive. Taking Switzerland as a case study, this work points towards important methodological difficulties in the measurement of FTA effects on trade at the disaggregated level.

Volume 67, Issue III
The following articles were published in the third issue of the Aussenwirtschaft 2016.

EU-Swiss trade integration via input-output linkages
Peter H. Egger and Katharina Erhardt
Abstract
This paper provides a first assessment of Switzerland's international input-output linkages. In doing so, the paper focuses on Switzerland's trade with the European Union which represents the country's most important trading partner. In 2015, more than 50% of Swiss exports were directed to the EU while more than 70% of Swiss imports were sourced from EU countries. Using data on Switzerland's transaction-level imports and data on the sector association of a subset of Swiss firms, we are able to characterize the detailed nature of these imports regarding the sectors they are directed to and the countries they are originating from.

Switzerland's Gains from Trade with Europe
Christian Hepenstrick
Abstract
In this paper I look at the size of Switzerland's gains from trade through the lens of a workhorse model of modern trade theory. The model finds that most of Switzerland's gains from trade origin in the EU and that realistic changes in the degree of trade integration with EU countries may have non-trivial - but at the same time not excessively large - effects on Swiss per-capita incomes. The model also suggests that further trade integration with third countries such as China and India tends to increase Swiss welfare, but is unlikely to be able to compensate for possible losses stemming from deteriorating trade relations with European countries. Comment by Reto Foellmi

MRIO Linkages and Switzerland's CO2 Profile
Octavio Fernández-Amador, Joseph F. Francois and Patrick Tomberger
Abstract
We examine the importance of linkages between the Swiss economy and other regions (especially Western Europe) for Switzerland’s CO2 profile. Overall, both final production and consumption carbon footprints and intensities are much larger than (about double) the footprint from territorial production, which is the traditional measure used within the framework of the Kyoto Protocol. The carbon footprint of territorial production decreased during 1997–2011, whereas the carbon footprint of consumption remained quite steady and the footprint from final production increased over the same period. All carbon intensities have decreased, however, though the differential between territorial production and final production and consumption has remained the same. These findings highlight the role of emissions embodied in trade flows, particularly with the group of developed members of the European Union, for a small open economy like Switzerland. They also call for the use of consumption-based criteria, together with criteria based on territorial production and final production, to establish and monitor the Swiss carbon footprint. Comment by Marcelo Olarreaga

Collateral damage: The harm done to Swiss commercial interests by EU policies since the crisis began
Simon Evenett
Abstract
Since the onset of the global economic crisis on no occasion have the European Commission or European Union member state governments singled out Swiss commercial interests for discriminatory treatment. Even so, 200 official acts taken across the EU since November 2008 have caused collateral damage to Swiss commercial interests, three-quarters of which are still in force. Swiss exports worth more than 17 billion Francs face one or more crisis-era trade distortion. However, inferred trade cost data reveal that Swiss commercial interests have been discriminated against more than other major suppliers to EU markets in only three Member States. Comment by Claudio Wegmueller

Die Schweizer Wirtschaft zwischen Hammer und Amboss: Eine Analyse der „Franken-Schocks“ 2010/11 und 2015
Matthias Flückiger, Christian Rutzer and Rolf Weder
Abstract
In this paper, we examine the impact of the Swiss “Franc Shock” of 2010/11 and 2015 on the Swiss economy. At the macroeconomic level, it is shown that nominal wages – especially in the manufacturing sector – have not decreased as much as expected due to lowered prices and small labor productivity growth. The unemployment rate has increased only by a small amount. Examining Swiss trade, we can confirm a negative effect of the currency appreciation on both quantities and prices of exports. This effect depends on the heterogeneity of products as well as on the destination country. It follows that export-intensive sectors (and companies) that face tough import competition have experienced the most negative effects. However, compared with fluctuations of the GDP of trading partners, the impact of the exchange rate is only secondary. Hence, the future trend in the global business cycle will crucially affect the economic pressure on the Swiss economy.

Volume 67, Issue II
The following articles were published in the second issue of the Aussenwirtschaft 2016

Exchange rate floor and central bank balance sheets: Simple spillover tests of the Swiss franc.
Adrien Alvero und Andreas M. Fischer
Abstract
This paper examines spillover and spillback effects of unconventional monetary policies conducted by the European Central Bank (ECB) and Swiss National Bank (SNB) on the exchange rate’s distribution. The empirical setup examines the price response of EURCHF risk reversal to a change in ECB and SNB balance sheets, with a distinction for the period of the minimum exchange rate (floor). The analysis finds only weak evidence of spillover effects from the ECB, while the spillback effect from the SNB balance sheet is robust during the floor period. Comment by Eric Jondeau

 

The banking sector and the Swiss financial account during the financial and European debt crises.
Raphael A. Auer und Cédric Tille
Abstract
The US financial crisis and the later Eurozone crisis have substantially affected capital flows into and out of financial centers like Switzerland. We focus on the pattern of capital flows involving the Swiss banking industry. We first rely on balance-of-payment statistics and show that net banking inflows rose during the acute phases of the crises, albeit with a contrasting pattern. In the wake of the collapse of Lehman Brothers, net inflows were driven by a large retrenchment towards the domestic market by Swiss banks. By contrast, the net inflows from mid-2011 to mid-2012 were driven by large flows into Switzerland by foreign banks. We then use more detailed data from the Swiss banking statistics which allow us to contrast the situation across different banks and currencies. We show that the cycle during the US crisis in bank flows was driven strongly by exposures in US dollars, and to a large extent by Swiss-owned banks. During the Eurozone crisis by contrast, the flight to the Swiss franc and the move away from the Euro was also driven by banks that are located in Switzerland, yet are foreign-owned. In addition, while the demand for the franc was driven by both foreign and domestic customers during mid-2011 to early 2013, domestic demand took a prominent role thereafter.

 

The historical origins of the safe haven status of the Swiss franc.
Ernst Baltensperger und Peter Kugler
Abstract
An empirical analysis of international interest rates and of the behavior of the exchange rate of the Swiss franc since 1850 leads to the conclusion that World War I marks the origin of the strong currency and safe haven status of the Swiss franc. Before World War I, interest rates point to a weakness of the Swiss currency against the pound, the guilder and French franc (from 1881 to 1913) that is shared with the German mark. Thereafter, we see the pattern of the Swiss interest rate island develop and become especially pronounced during the Bretton Woods years. Deviations from metallic parities confirm these findings. For the period after World War I, we establish a strong and stable real and nominal trend appreciation against the pound and the dollar that reflects, to a sizeable extent, inflation differentials. Comment by Tobias Straumann

 

Risk premia on Swiss government bonds and sectoral stock indexes during international crises.
Thomas Nitschka
Abstract
This paper assesses the sensitivity of excess returns on Swiss government bond and sectoral stock indexes to risk factors during international crisis and non-crisis periods over the sample period from January 1995 to December 2014. The empirical results show that assets that were closely linked to the Swiss economy, such as government bonds or stocks from “non-tradable” sectors, exhibited safe haven characteristics during the Eurozone sovereign debt crisis and in the noncrisis periods. This finding does not pertain to assets closely linked to international economic developments, such as stocks from tradable goods sectors.

Volume 67, Issue I
The following articles were published in the first issue of the Aussenwirtschaft 2016.

Hosting multinationals: Economic and fiscal implications.
Peter Egger und Marko Koethenbuerger
Abstract
Switzerland is a prime location for both domestically owned as well as foreign-owned multinational enterprises (MNEs). In this paper, we review the literature on MNE activity with respect to its main fundamental (non-policy) drivers, the non-fiscal consequences of MNEs for various economic aggregates, and the fiscal implications associated with the operation of foreign affiliate networks. In particular, the paper puts emphasis on the fiscal implications of hosting MNEs and their relation to the current tax environment in Switzerland. Comment by Christian Keuschnigg

 

Knife edge? Switzerland as a base for multinational companies as relations worsen with the European Union.
Simon J. Evenett
Abstract
During the past seven years, Swiss-EU economic relations have deteriorated, with the vote by the Swiss people in 2014 in favor of immigration limits bringing matters to a head. Using the latest available data on the financial performance of US multinationals operating across Europe, this paper estimates how large the revenue and cost shocks that could follow a rupture of Swiss-EU relations would need to be to alter return on investment calculations enough so as to possibly induce multinationals to relocate to other European locations. Of Switzerland’s immediate neighbors, only Austria poses a potential threat in this regard. Excluding Europe’s periphery, returns on US assets invested in the Netherlands fall just short of those in Switzerland. Comment by Reto Foellmi

 

The stickiness of national competitiveness: Implications for Switzerland and beyond.
Stephan Mumenthaler und Barbara von Schnurbein
Abstract
This paper postulates that a country’s competitiveness is sticky, i.e. it does not react immediately to changes in underlying framework conditions. The causes of this stickiness can be categorized along three dimensions. First, there is a delay between policy actions and their impact on competitiveness (“pipeline effect”). Second, visible reactions of firms to changes in framework conditions lag behind insofar as firms react relatively quickly on the margin, i.e. with new projects, but react only slowly with existing activities due to sunk-cost effects (“overflow effect”). Third, as politics reacts only to visible changes in competitiveness, and given that these actions again need time to take effect, reactions are systematically delayed. Policymaking should take into account all three of these dimensions of stickiness to prevent major damage to a country’s competitiveness. This is especially relevant in a small open economy like Switzerland, as the relatively small size of the home market compared to exports amplifies the effect of changes in framework conditions on competitiveness. We therefore conclude by presenting policy measures to help anticipate and dissipate the negative effects of stickiness.

 

Multis: Ihre Rolle und Bedeutung in der schweizerischen Wirtschaftspolitik.
Rudolf Walser und Alois Bischofberger
Abstract
Mit diesem Artikel wird der Diskurs fortgesetzt, den Avenir Suisse mit seinem Diskussionspapier «Multis: Zerrbild und Wirklichkeit. Der vielfältige Beitrag globaler Unternehmen zum Schweizer Wohlstand» 2013 angestossen hat. Er behandelt ausgewählte wirtschafts- und gesellschaftspolitische Fragestellungen und gliedert sich in vier Kapitel. Im ersten wird die Stellung und Rolle der Multis sowohl im Wertschöpfungsprozess als auch im Innovationssystem der Schweiz dargestellt. Das zweite Kapitel ist dem Bankensektor gewidmet, können doch die grössten Institute im internationalen Vermögensverwaltungsgeschäft ebenfalls als multinationale Unternehmen verstanden werden. Dass sich Multis nach wie vor als willkommene Projektionsfläche für allerlei Unzufriedenheit und angebliche Fehlentwicklungen anbieten, zeigt das 3. Kapitel. Es setzt sich mit der Corporate Social Responsability (CSR), der Exponiertheit der Schweiz sowie gesellschaftlichen und politischen Störfaktoren im Zusammenhang mit den Multis auseinander. Schliesslich plädiert das vierte Kapitel für eine mutige liberale Standortpolitik, weil es im ureigenen Interesse der Schweiz liegt, eine ideale Plattform für multinationale Unternehmen zu bleiben, bilden sie doch mit ihrer Innovationskraft und hohen Produktivität einen integralen Teil der nationalen Volkswirtschaft. Deshalb müssen die Stärken des Standorts gezielt gepflegt werden, ist doch der Wettbewerb um diese Unternehmen unter den heutigen und absehbaren weltwirtschaftlichen Perspketiven viel schärfer, als die Schweiz in den aktuellen wirtschafts-, finanz- und steuerpolitischen Gesetzesprojekten unterstellt. Die Verteidigung und Behauptung dieser Standortgunst sollte deshalb zum strategischen Ziel der schweizerischen Aussen- und Wirtschaftspolitik gemacht werden. Es ist dies zugegebenermassen ein normativer Ansatz, der sich allerdings gut begründen lässt.

 

Hosting multinationals: Economic and fiscal implications. Peter Egger und Marko Koethenbuerger
Abstract
Switzerland is a prime location for both domestically owned as well as foreign-owned multinational enterprises (MNEs). In this paper, we review the literature on MNE activity with respect to its main fundamental (non-policy) drivers, the non-fiscal consequences of MNEs for various economic aggregates, and the fiscal implications associated with the operation of foreign affiliate networks. In particular, the paper puts emphasis on the fiscal implications of hosting MNEs and their relation to the current tax environment in Switzerland. Comment by Christian Keuschnigg

Knife edge? Switzerland as a base for multinational companies as relations worsen with the European Union. Simon J. Evenett
Abstract
During the past seven years, Swiss-EU economic relations have deteriorated, with the vote by the Swiss people in 2014 in favor of immigration limits bringing matters to a head. Using the latest available data on the financial performance of US multinationals operating across Europe, this paper estimates how large the revenue and cost shocks that could follow a rupture of Swiss-EU relations would need to be to alter return on investment calculations enough so as to possibly induce multinationals to relocate to other European locations. Of Switzerland’s immediate neighbors, only Austria poses a potential threat in this regard. Excluding Europe’s periphery, returns on US assets invested in the Netherlands fall just short of those in Switzerland. Comment by Reto Foellmi

The stickiness of national competitiveness: Implications for Switzerland and beyond. Stephan Mumenthaler und Barbara von Schnurbein
Abstract
This paper postulates that a country’s competitiveness is sticky, i.e. it does not react immediately to changes in underlying framework conditions. The causes of this stickiness can be categorized along three dimensions. First, there is a delay between policy actions and their impact on competitiveness (“pipeline effect”). Second, visible reactions of firms to changes in framework conditions lag behind insofar as firms react relatively quickly on the margin, i.e. with new projects, but react only slowly with existing activities due to sunk-cost effects (“overflow effect”). Third, as politics reacts only to visible changes in competitiveness, and given that these actions again need time to take effect, reactions are systematically delayed. Policymaking should take into account all three of these dimensions of stickiness to prevent major damage to a country’s competitiveness. This is especially relevant in a small open economy like Switzerland, as the relatively small size of the home market compared to exports amplifies the effect of changes in framework conditions on competitiveness. We therefore conclude by presenting policy measures to help anticipate and dissipate the negative effects of stickiness.

Multis: Ihre Rolle und Bedeutung in der schweizerischen Wirtschaftspolitik. Rudolf Walser und Alois Bischofberger
Abstract
Mit diesem Artikel wird der Diskurs fortgesetzt, den Avenir Suisse mit seinem Diskussionspapier «Multis: Zerrbild und Wirklichkeit. Der vielfältige Beitrag globaler Unternehmen zum Schweizer Wohlstand» 2013 angestossen hat. Er behandelt ausgewählte wirtschafts- und gesellschaftspolitische Fragestellungen und gliedert sich in vier Kapitel. Im ersten wird die Stellung und Rolle der Multis sowohl im Wertschöpfungsprozess als auch im Innovationssystem der Schweiz dargestellt. Das zweite Kapitel ist dem Bankensektor gewidmet, können doch die grössten Institute im internationalen Vermögensverwaltungsgeschäft ebenfalls als multinationale Unternehmen verstanden werden. Dass sich Multis nach wie vor als willkommene Projektionsfläche für allerlei Unzufriedenheit und angebliche Fehlentwicklungen anbieten, zeigt das 3. Kapitel. Es setzt sich mit der Corporate Social Responsability (CSR), der Exponiertheit der Schweiz sowie gesellschaftlichen und politischen Störfaktoren im Zusammenhang mit den Multis auseinander. Schliesslich plädiert das vierte Kapitel für eine mutige liberale Standortpolitik, weil es im ureigenen Interesse der Schweiz liegt, eine ideale Plattform für multinationale Unternehmen zu bleiben, bilden sie doch mit ihrer Innovationskraft und hohen Produktivität einen integralen Teil der nationalen Volkswirtschaft. Deshalb müssen die Stärken des Standorts gezielt gepflegt werden, ist doch der Wettbewerb um diese Unternehmen unter den heutigen und absehbaren weltwirtschaftlichen Perspketiven viel schärfer, als die Schweiz in den aktuellen wirtschafts-, finanz- und steuerpolitischen Gesetzesprojekten unterstellt. Die Verteidigung und Behauptung dieser Standortgunst sollte deshalb zum strategischen Ziel der schweizerischen Aussen- und Wirtschaftspolitik gemacht werden. Es ist dies zugegebenermassen ein normativer Ansatz, der sich allerdings gut begründen lässt.

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