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Europe > Switzerland

You are looking at 1 - 10 of 36 items for :

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Cover IMF Staff Country Reports
Switzerland: Selected Issues
International Monetary Fund. European Dept.
This Selected Issue Paper studies the relationship between monetary policy, financial conditions, and real activity during the current monetary policy-tightening episode in Switzerland. After a review of various channels through which monetary policy changes affect financial conditions, the paper shows that the transmission of policy rates to market rates has been swift and that the exchange rate is an important channel. The response of real activity to tightening financial conditions has remained broadly in line with past tightening episodes. The interest rate increase has influenced cash flows for households due to higher mortgage interest expenses. Higher interest rates also lead to higher rental cost for non-homeowners. Policy rate adjustments affect the average interest rates of mortgages and thus the mortgage reference interest rate, which is a factor for rent adjustments by Swiss regulation. Monetary tightening has contributed to a slowdown of private credit and house-price growth. Growth of mortgage loans, which represent 85 percent of bank lending, moderated to 2.4 percent in 2023 from 3.5 percent in 2022.
Keywords:
mortgage price; market valuation; real estate price development; monetary policy transmission; B. Beveridge Curve dynamics; Real estate prices; Mortgages; Labor markets; Inflation; Central bank policy rate; Global; Europe
Cover Policy Papers
Resilience and Sustainability Trust―2024 Contribution Agreements with Belgium, Malta, Qatar, and Switzerland
International Monetary Fund. Finance Dept.
and
International Monetary Fund. Legal Dept.
This paper presents Resilience and Sustainability (RST) contribution agreements finalized with four contributors between October 2023 and March 15, 2024. The concluded agreements provide for contributions in a total amount of about SDR 1.2 billion across the three RST accounts – the loan account, deposit account, and reserve account. The new agreements with four members add critical resources that support the continued smooth operations of the RST.
Keywords:
Resilience and Sustainability Trust (RST); Contribution agreements; Resource adequacy; Funding; Contributions; transparency policy; deposit account claim; DA agreement; DA portion; DA contribution; DA assets; Loans; SDR interest rate
Cover IMF Working Papers
Monetary Policy Pass-Through to Interest Rates: Stylized Facts from 30 European Countries
Robert C. M. Beyer
,
Ruo Chen
,
Florian Misch
,
Claire Li
,
Ezgi O. Ozturk
, and
Lev Ratnovski
The extent to which changes in monetary policy rates lead to changes in loan and deposit rates for households and firms, referred to as ‘pass-through’, is an important ingredient of monetary policy transmission to output and prices. Using data on seven different bank interest rates in 30 European countries, different approaches, and the full sample as well as a subsample of euro area countries, we show that a) the pass-through in the post-pandemic hiking cycle has been heterogenous across countries and types of interest rates; b) the pass-through has generally been weaker and slower, except for rates of non-financial corporation loans and time deposits in euro area countries; c) differences in pass-through over time and across countries for most deposit rates are correlated with financial sector concentration, liquidity, and loan opportunities, and d) the effects of pass-through to outstanding mortgage rates on monetary transmission on prices and output are heterogenous across countries.
Keywords:
Monetary Policy Transmission; Monetary Policy Pass-Through; NFC loan rate; pass-through to rate; transmission to output; Deposit rates; Central bank policy rate; Mortgages; Loans; Financial sector; Europe
Cover IMF Staff Country Reports
Switzerland: 2023 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Switzerland
International Monetary Fund. European Dept.
This 2023 Article IV Consultation with Switzerland discusses that growth slowed in 2022, while inflation became a new challenge after a decade of ultra-low or negative inflation. Growth is expected to slow further in 2023—driven by the weak global outlook, tighter monetary policy, and cooling of pent-up demand, before recovering to medium-term potential in 2024. Risks are tilted to the downside, with high uncertainty. Two near-term scenarios are noteworthy. First, an abrupt, synchronized global slowdown could take place at the same time as prolonged high inflation in advanced economies, due to monetary policy miscalibration. Passage and implementation of the revised CO2 Law are critical to achieving climate targets; more is needed to ensure secure energy supply. Efforts to ease the tight labor market should continue. The response to higher inflation has been appropriate and should remain data driven, including further rate hikes if needed. If facing depreciation pressures, the Swiss National Bank could continue to reduce foreign exchange (FX) holdings; it should refrain from FX investments to curb appreciation unless due to excessive market volatility.
Keywords:
draft legislation; SNB balance sheet; FSI website; AML ordinance; investment strategy; well-functioning of financial markets; banking stress test model; Switzerland's GDP; Switzerland well; SNB data; IMF of the exchange restriction; IMF's transparency policy; Inflation; Credit; Financial statements; Central bank policy rate; Global
Cover IMF Working Papers
Dirty Money: Does the Risk of Infectious Disease Lower Demand for Cash?
Mr. Serhan Cevik
The coronavirus pandemic is a global crisis like no other in modern times, and there is a growing apprehension about handling potentially contaminated cash. This paper is the first empirical attempt in the literature to investigate whether the risk of infectious diseases affects demand for physical cash. Since the intensity of cash use may influence the spread of infectious diseases, this paper utilizes two-stage least squares (2SLS) methodology with instrumental variable (IV) to address omitted variable bias and account for potential endogeneity. The analysis indicates that the spread of infectious diseases lowers demand for physical cash, after controlling for macroeconomic, financial, and technological factors. While the transactional constraints imposed by the COVID-19 pandemic could become a catalyst for the use of digital technologies around the world, electronic payment methods may not be universally available in every country owing to financial and technological bottlenecks.
Keywords:
Demand for cash; currency-in-circulation; digital money; infectious diseases; WP; cash use; handling cash; cash transfer; store of value; infectious-disease outbreak; payment method; coronavirus pandemic; Communicable diseases; Currencies; COVID-19; Deposit rates; Ebola; Global
Cover IMF Working Papers
Public Debt and r - g at Risk
Weicheng Lian
,
Mr. Andrea F Presbitero
, and
Ursula Wiriadinata
As interest rate-growth differentials (r-g) turned negative in many countries, governments consider pursuing fiscal expansion and the potential risks involved. Using a large sample of advanced and emerging economies, our analysis suggests that high public debts can lead to adverse future r-g dynamics. Specifically, countries with higher initial public debt experience (i) a shorter duration of negative r-g episodes and a higher probability of reversal, (ii) higher average r-g, and (iii) a more right-skewed r-g distribution, that implies higher down-side risks. Furthermore, high-debt countries experience larger increases in interest rates in response to (iv) an unexpected decline in domestic output and (v) an increase of global volatility. Results are stronger when public debts are denominated in foreign currencies.
Keywords:
WP; interest rate-growth differential; debt country; interest-rate response; interest rates environment; U.S. dollar; Public debt; Interest rate-growth differential; Shocks; Fiscal policy; Foreign currency debt; FX share group; public debt-to-GDP; Long term interest rates; Currencies; Global
Cover IMF Working Papers
Hidden Treasure: The Impact of Automatic Exchange of Information on Cross-Border Tax Evasion
Sebastian Beer
,
Maria Delgado Coelho
, and
Sebastien Leduc
We analyze the impact of exchange of information in tax matters in reducing international tax evasion between 1995 and 2018. Based on bilateral deposit data for 39 reporting countries and more than 200 counterparty jurisdictions, we find that recent automatic exchange of information frameworks reduced foreign-owned deposits in offshore jurisdictions by an average of 25 percent. This effect is statistically significant and, as expected, much larger than the effect of information exchange upon request, which is not significant. Furthermore, to test the sensitivity of our findings, we estimate countries’ offshore status and the impact of information exchange simultaneously using a finite mixture model. The results confirm that automatic (and not upon request) exchange of information impacts cross-border deposits in offshore jurisdictions, which are characterized by low income tax rates and strong financial secrecy.
Keywords:
WP; bank deposit; EOI agreement; tax evasion; exchange of information; cross-border deposits; treatment effect; offshore center; biases result; standard error; Anti-money laundering and combating the financing of terrorism (AML/CFT); Offshore financial centers; Double taxation; Personal income tax; Global
Cover IMF Working Papers
Covered Interest Parity Deviations: Macrofinancial Determinants
Mr. Eugenio M Cerutti
,
Mr. Maurice Obstfeld
, and
Haonan Zhou
For about three decades until the Global Financial Crisis (GFC), Covered Interest Parity (CIP) appeared to hold quite closely—even as a broad macroeconomic relationship applying to daily or weekly data. Not only have CIP deviations significantly increased since the GFC, but potential macrofinancial drivers of the variation in CIP deviations have also become significant. The variation in CIP deviations seems to be associated with multiple factors, not only regulatory changes. Most of these do not display a uniform importance across currency pairs and time, and some are associated with possible temporary considerations (such as asynchronous monetary policy cycles).
Keywords:
WP; U.S. dollar; cross-currency basis; cross-currency dollar basis; basis calculation; Covered Interest Parity; Interest Rate Differentials; Forward FX Market; dollar strength; investment option; time-series regression; dollar appreciation; Interest rate parity; Currencies; Global financial crisis of 2008-2009; Interbank rates; Money markets; Global
Cover IMF Working Papers
Quantitative Easing and Long-Term Yields in Small Open Economies
Antonio Diez de los Rios
and
Maral Shamloo
We compare the effectiveness of Federal Reserve's asset purchase programs in lowering longterm yields with that of similar programs implemented by the Bank of England, the Swedish Riksbank, and the Swiss National Bank's reserve expansion program. We decompose government bond yields into (i) an expectations component, (ii) a global, and (iii) a country specific term premium to analyze two-day changes in 10-year yields around announcement dates. We find that, in contrast to the Federal Reserve's asset purchases, the programs implemented in these smaller economies have not been able to affect the global term premium and, furthermore, they have had limited, but significant, effect in lowering long-term yields.
Keywords:
WP; yield; asset purchase; expected return; Unconventional monetary policy; event study; signaling; portfolio balance; asset purchases; purchase announcement; long-term yield; purchase program; QE asset purchase; QE program; Riksbank asset purchase announcement; asset purchase announcement; BoE Monetary Policy Commitee; fed funds rate; zero-coupon bond; Yield curve; Unconventional monetary policies; Bonds; Sovereign bonds; Long term interest rates; Global
Cover Policy Papers
Negative Interest Rate Policies—Initial Experiences and Assessments
International Monetary Fund
The depth of the crisis and the weakness of the ensuing recovery led to new ways to implement monetary policy. At the onset of the crisis, central banks in several advanced economies quickly moved policy rates to zero and initiated large-scale asset purchases. In more recent years, with inflation still below target and limited support from fiscal policy, several central banks lowered their policy rates below the previous zero lower bound, embarking on so-called negative interest rate policies (NIRPs). This paper explores the implications of NIRPs for monetary policy transmission and banks’ behavior. It considers potential differences between interest rate cuts in positive versus negative territory on deposit and lending rates, as well as banks’ interest rate margins and profitability, and market functioning. The paper focuses on the bank transmission channel, where differences between positive and negative policy rates could arise. Finally, the paper reviews cross-country experiences through case studies.
Keywords:
PP; bank profitability; lending rate; deposit rate; money market; yield curve; Policy rate; Central bank policy rate; Deposit rates; Currencies; Bank soundness; Negative interest rates; Europe; Global; Southern Europe