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IMF Country Report No. 22/172

SWITZERLAND

SELECTED ISSUES

June 2022

This Selected Issues paper on Switzerland was prepared by a staff team of the International Monetary Fund as background documentation for the periodic consultation with the member country. It is based on the information available at the time it was completed on May 25, 2022.

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Title page

SWITZERLAND

SELECTED ISSUES

May 25, 2022

Approved By

European Department

Contents

• BIG ACQUISITION, SMALL ACCUMULATION: WHY?—A LOOK AT SWITZERLAND’S BOP-IIP DYNAMICS

• A. The Puzzle of Big Acquisition and Small Accumulation

• B. Analysis of Switzerland’s Integrated IIP Statement

• C. A Cross-Country Comparison

• D. Summary

• FIGURES

• 1. An Illustration of the BOP-IIP Dynamics

• 2. Switzerland: The Puzzle of Big Acquisition and Small Accumulation

• 3. Switzerland: Franc NEER Index

• 4. Cumulative Financial Account Balances versus Changes in NIIP, 2008–20

• 5. Cumulative Financial Account Balances versus NEER Changes, 2008–20

• 6. Cumulative Financial Account Balances versus Changes in REER, 2008–20

• 7. Norwegian Krone REER and Oil Prices

• TABLES

• 1. Switzerland: Net International Investment Position

• 2. Switzerland: International Investment Position by Component

• 3. Switzerland: Investment Returns of Foreign Assets and Liabilities

• 4. Switzerland: Shares of Equity Investment

• 5. Switzerland versus Israel: Cumulative International Investment Position Changes, 2008–2020

• 6. Switzerland versus Israel: International Investment Returns (%), 2008–2020

• 7. Decomposition of 2008–2020 Cumulative Financial Account Balances

• References

• A FORWARD-LOOKING APPROACH TO CALIBRATE MACROPRUDENTIAL TOOLS IN SWITZERLAND

• A. The Build-Up of Systemic Risk

• B. The Policy Response

• C. Transmission Channels of Macroprudential Tools

• D. A Modeling Approach to Quantify Banking System Resilience

• E. Stress Test Results under Current Macroprudential Tools

• F. Calibration of Borrower-Based Macroprudential Tools

• G. Policy Implications

• FIGURES

• 1. Macro-financial Relevance of the Mortgage Market

• 2. Policy Response, Mortgage Credit, House Prices, and Interest Rates

• 3. Leverage in Residential Real Estate Loans

• 4. Impact of Interest Rate Shocks on Affordability Risk

• 5. Stress Test Scenario: Key Variables

• 6. Stress Test Results

• 7. Timeline of Macroprudential Policy Interventions

• 8. Impact of Borrower-Based Tools Under Adverse Scenario by Vintage

• References

• ANNEX

• I. Technical Aspects of the Model

• NATURAL GAS IN SWITZERLAND: CONSUMPTION, IMPORTS, AND RISKS

• A. Motivation

• B. Natural Gas Reliance in Switzerland and the European Union

• C. Analyzing an Impact of a Stop in Russian Gas Imports

• D. Policy Implications

• FIGURES

• 1. Switzerland: Energy Prices

• 2. Switzerland: Gross Energy Consumption

• 3. Switzerland: Energy Usage for Heating and Electricity

• 4. Heat Production in Switzerland and the EU

• 5. Switzerland: Natural Gas Usage

• 6. Monthly Natural Gas Imports

• 7. Imports of Natural Gas

• 8. Switzerland: Baseline

• 9. Switzerland: Scenario of No Russian Gas Imports

• References