Makroökonomie (Lein)Head of Research Unit Prof. Dr.Sarah LeinOverviewMembersPublicationsProjects & CollaborationsProjects & Collaborations OverviewMembersPublicationsProjects & Collaborations Projects & Collaborations 12 foundShow per page10 10 20 50 FV-97 | Firmeninterner Handel und Wechselkurssensitivität der Preise Research Project | 2 Project MembersThis project examines intra-firm trade and its implications for exchange-rate sensitivity of prices. Shock Transmission and Welfare Effects in Global Production Networks Research Project | 3 Project MembersMost firms engaged in international trade are part of a production network, being a seller and buyer of several products at the same time. These linkages between firms within and across borders expose firms to uncertainty, both directly via their immediate customers and suppliers, and indirectly via their customers' and suppliers' networks of business partners. Importantly, such networks imply heterogeneous responses of firms to upstream or downstream disruptions that depend on the exact structure of their individual value chains. In this project, we empirically study the role of international production networks for the propagation of shocks and the implications for firm behaviour and welfare.In a first part of this research agenda, we will focus on how a firm's reaction to an aggregate shock depends on its international network structure. Using confidential Swiss customs data, proprietary firm data, and a reduced-form event study approach, we will examine the impact of a sudden appreciation of the Swiss Franc in January 2015 on how firms adjusted their export prices (pass-through), quantities, and the average quality of goods exported. The exposure, the extent and the margin of response of any given Swiss exporting firm depends on specific features of its production network, that is, on the share of imported intermediate inputs and on the currency of invoicing of these imports and of their exports. Accordingly, we will study (1) the implications of heterogeneity due to this direct exposure and the interaction between invoicing and a firm's import/export structure. In addition, we measure indirect exposure to the exchange rate shock by means of international and domestic input-output tables to analyse (2) whether indirect exposure to the shock via production networks was quantitatively important.In a second part of the research agenda, we will focus on the propagation of local shocks through the production network. To do so, we rely on a difference-in-differences design where we exploit the staggered introduction of lockdowns during the COVID-19 pandemic over time and space, starting January 2020 in China and followed by lockdowns in Italy and then in northern European countries. These lockdowns led to disruptions of supply chains from the perspective of Swiss firms in the period before Switzerland implemented a partial lockdown itself. Using the same database as above, we study (1) how Swiss companies adjusted their trade flows with existing buyers and suppliers, (2) to what extent they substituted from business partners with local disruptions toward those that were unaffected, and (3) how firm performance was impacted given the modified production network.The results we expect from this research are highly relevant for the literature on supply networks in international macroeconomics. We will also tie together this literature on production networks with the recent literature that highlights the important role of currency choice. It will furthermore deepen our understanding of the effects of the pandemic in a globalised world. In the process, we will also construct a database on transaction-level trade flows that includes firm characteristics and firm balance sheets. We will make all codes and documentation freely available to other researchers who will benefit from reduced start-up costs. Price indexes during lockdown conditions Research Project | 2 Project MembersUsing online data for prices and real-time debit card transaction data on changes in expenditures for Switzerland allows us to track inflation on a daily basis. While the daily price index fluctuates around the official price index in normal times, it drops immediately after the lockdown related to the COVID19 pandemic. Official statistics reflect this drop only with a lag, specifically because data collection takes time and is impeded by lockdown conditions. Such daily real-time information can be useful to gauge the relative importance of demand and supply shocks and thus inform policymakers who need to determine appropriate policy measures. Dynamics of real exchange rates and consumer heterogeneity Research Project | 2 Project MembersWe study the dynamics of real exchange rates and how heterogeneity of consumption baskets across countries influences these dynamics. We also analyse the role of purely local goods. Granularities in inflation rates Research Project | 2 Project MembersWe study the role of large firms in inflation dynamics and in the transmission of inflationary shocks across countries. Systemic risk evaluation of interconnected banks Research Project | 1 Project MembersThe recent global financial market crisis and the subsequent sovereign debt crisis in the euro zone has led the ECB and other central banks to introduce unconventional monetary policy measures with the aim to restore liquidity in the interbank and bond market across the euro area. Several programmes aimed to improve creditworthiness of banks and together with new regulatory frameworks tried to decrease systemic risk. My research aims to analyse the effects of the ECB's conventional and unconventional monetary policy as well as regulatory effects on the dynamics of systemic risk in the euro-zone from the perspective of financial institutions and markets. Understanding the effects of unconventional policy measures is important because it is very likely that they will become more prevalent in the future. In a low interest rate environment, central banks are constrained by the effective lower bound on nominal interest rates more frequently, making unconventional policies necessary. I will employ a network model in order to understand the dynamics of bank interconnectedness. Macro-prudential regulation views systemic risk as dependent on collective behaviour (endogenous), therefore, a network methodology is essential. I will follow a game theoretical network modelling approach based on Shapley values. Thanks to a unique dataset of interbank liabilities, available at the Swedish Riksbank, I can estimate realistic bank network dynamics, beyond mere simulations, which have been the convention so far due to limited data availability. I will, for the first time, be able to see the time evolution of individual bank's marginal contribution to systemic risk within the changing network structure of the banks, thereby gaining insights into dynamics of the systemic importance of banks. Hence, my network model, which is a macro-prudential approach, will provide valuable input to regulators, policy makers, and academic researchers. In this sense, the results will be highly relevant from a regulatory and supervisory viewpoint. Consumer heterogeneity and elasticities of subsitution across regions Research Project | 2 Project MembersWe study how consumers switch across regions when the relative price of products between these regions changes. We also study how consumers' inflation rates vary over time and how much of this variation can be explained by differences in income, demand elasticities, and differences in prices paid for the same products. Product quality adjustments and exchange rates Research Project | 2 Project MembersFirms have various instruments to adjust prices of their products after exchange-rate shocks. While extensive research has been conducted on the aggregate pass-through of exchange-rate changes into prices, we know very little about other means of price adjustment. For this aim, we look at the role of supply-side adjustments, that is products may enter the market, exit the market or the quality of existing products may change. We find a remarkably strong response of quality for export prices after the 2015-appreciation in Switzerland, which accounts for more than one third of the change in export prices one year after the shock. Prices for products produced in Switzerland that are sold in the domestic market adjust quality, too, but to a lesser extent. There is no systematic quality adjustment of import prices after the CHF shock. We furthermore show that firms that experience larger drops in imported intermediate input prices improve quality of their exports by more than firms with small changes in intermediate input prices. Firms that compete with imports in the domestic market also improve quality as a response to lower prices of competitors. Currently, we are using transaction level export data to characterize the product groups that drive these quality adjustments. Financial frictions and firm-level outcomes Research Project | 1 Project MembersWe study how firms hire labour and invest in capital stock depending on their financial situation. We find that firms that are financially constrained tend to have larger employment elasticities with respect to demand, whereas financially unconstrained firms tend to hoard labour. These findings can explain the differential response of employment during different crises, where some resulted in large employment losses, whereas others did not. We also study the role of financial fricitions for investments. Preliminary results suggest a relatively large effect (which would suggest a large amplification of business cycles). Exchange-rate pass-through, role of currency for allocations in international trade Research Project | 1 Project MembersThe removal of the lower bound on the EUR/CHF exchange rate in January 2015 provides a unique setting to study the implications of a large and sudden appreciation in an otherwise stable macroeconomic environment. Using transaction-level data on non-durable goods purchases by Swiss consumers, we measure the response of border and consumer retail prices to the CHF appreciation and how household expenditures responded to these price changes. Consumer prices of imported goods and of competing Swiss-produced goods fell by more in product categories with larger reductions in border prices and a lower share of CHF-invoiced border prices. These price changes resulted in substantial expenditure switching between imported and Swiss-produced goods. While the frequency of import retail price reductions rose in the aftermath of the appreciation, the average size of these price reductions fell (and more so in product categories with larger border price declines and a lower share of CHF-invoiced border prices), contributing to low pass-through into import prices. In a separate sub-project, we also study the allocative role of currency of invoicing on exports and find similar dynamics. We furthermore show that exports in larger sectors are less sensitive to exchange rate fluctuations than rather small sectors and that thos sectors, that are less sensitive, have grown over time in Switzerland. 12 12 OverviewMembersPublicationsProjects & Collaborations
Projects & Collaborations 12 foundShow per page10 10 20 50 FV-97 | Firmeninterner Handel und Wechselkurssensitivität der Preise Research Project | 2 Project MembersThis project examines intra-firm trade and its implications for exchange-rate sensitivity of prices. Shock Transmission and Welfare Effects in Global Production Networks Research Project | 3 Project MembersMost firms engaged in international trade are part of a production network, being a seller and buyer of several products at the same time. These linkages between firms within and across borders expose firms to uncertainty, both directly via their immediate customers and suppliers, and indirectly via their customers' and suppliers' networks of business partners. Importantly, such networks imply heterogeneous responses of firms to upstream or downstream disruptions that depend on the exact structure of their individual value chains. In this project, we empirically study the role of international production networks for the propagation of shocks and the implications for firm behaviour and welfare.In a first part of this research agenda, we will focus on how a firm's reaction to an aggregate shock depends on its international network structure. Using confidential Swiss customs data, proprietary firm data, and a reduced-form event study approach, we will examine the impact of a sudden appreciation of the Swiss Franc in January 2015 on how firms adjusted their export prices (pass-through), quantities, and the average quality of goods exported. The exposure, the extent and the margin of response of any given Swiss exporting firm depends on specific features of its production network, that is, on the share of imported intermediate inputs and on the currency of invoicing of these imports and of their exports. Accordingly, we will study (1) the implications of heterogeneity due to this direct exposure and the interaction between invoicing and a firm's import/export structure. In addition, we measure indirect exposure to the exchange rate shock by means of international and domestic input-output tables to analyse (2) whether indirect exposure to the shock via production networks was quantitatively important.In a second part of the research agenda, we will focus on the propagation of local shocks through the production network. To do so, we rely on a difference-in-differences design where we exploit the staggered introduction of lockdowns during the COVID-19 pandemic over time and space, starting January 2020 in China and followed by lockdowns in Italy and then in northern European countries. These lockdowns led to disruptions of supply chains from the perspective of Swiss firms in the period before Switzerland implemented a partial lockdown itself. Using the same database as above, we study (1) how Swiss companies adjusted their trade flows with existing buyers and suppliers, (2) to what extent they substituted from business partners with local disruptions toward those that were unaffected, and (3) how firm performance was impacted given the modified production network.The results we expect from this research are highly relevant for the literature on supply networks in international macroeconomics. We will also tie together this literature on production networks with the recent literature that highlights the important role of currency choice. It will furthermore deepen our understanding of the effects of the pandemic in a globalised world. In the process, we will also construct a database on transaction-level trade flows that includes firm characteristics and firm balance sheets. We will make all codes and documentation freely available to other researchers who will benefit from reduced start-up costs. Price indexes during lockdown conditions Research Project | 2 Project MembersUsing online data for prices and real-time debit card transaction data on changes in expenditures for Switzerland allows us to track inflation on a daily basis. While the daily price index fluctuates around the official price index in normal times, it drops immediately after the lockdown related to the COVID19 pandemic. Official statistics reflect this drop only with a lag, specifically because data collection takes time and is impeded by lockdown conditions. Such daily real-time information can be useful to gauge the relative importance of demand and supply shocks and thus inform policymakers who need to determine appropriate policy measures. Dynamics of real exchange rates and consumer heterogeneity Research Project | 2 Project MembersWe study the dynamics of real exchange rates and how heterogeneity of consumption baskets across countries influences these dynamics. We also analyse the role of purely local goods. Granularities in inflation rates Research Project | 2 Project MembersWe study the role of large firms in inflation dynamics and in the transmission of inflationary shocks across countries. Systemic risk evaluation of interconnected banks Research Project | 1 Project MembersThe recent global financial market crisis and the subsequent sovereign debt crisis in the euro zone has led the ECB and other central banks to introduce unconventional monetary policy measures with the aim to restore liquidity in the interbank and bond market across the euro area. Several programmes aimed to improve creditworthiness of banks and together with new regulatory frameworks tried to decrease systemic risk. My research aims to analyse the effects of the ECB's conventional and unconventional monetary policy as well as regulatory effects on the dynamics of systemic risk in the euro-zone from the perspective of financial institutions and markets. Understanding the effects of unconventional policy measures is important because it is very likely that they will become more prevalent in the future. In a low interest rate environment, central banks are constrained by the effective lower bound on nominal interest rates more frequently, making unconventional policies necessary. I will employ a network model in order to understand the dynamics of bank interconnectedness. Macro-prudential regulation views systemic risk as dependent on collective behaviour (endogenous), therefore, a network methodology is essential. I will follow a game theoretical network modelling approach based on Shapley values. Thanks to a unique dataset of interbank liabilities, available at the Swedish Riksbank, I can estimate realistic bank network dynamics, beyond mere simulations, which have been the convention so far due to limited data availability. I will, for the first time, be able to see the time evolution of individual bank's marginal contribution to systemic risk within the changing network structure of the banks, thereby gaining insights into dynamics of the systemic importance of banks. Hence, my network model, which is a macro-prudential approach, will provide valuable input to regulators, policy makers, and academic researchers. In this sense, the results will be highly relevant from a regulatory and supervisory viewpoint. Consumer heterogeneity and elasticities of subsitution across regions Research Project | 2 Project MembersWe study how consumers switch across regions when the relative price of products between these regions changes. We also study how consumers' inflation rates vary over time and how much of this variation can be explained by differences in income, demand elasticities, and differences in prices paid for the same products. Product quality adjustments and exchange rates Research Project | 2 Project MembersFirms have various instruments to adjust prices of their products after exchange-rate shocks. While extensive research has been conducted on the aggregate pass-through of exchange-rate changes into prices, we know very little about other means of price adjustment. For this aim, we look at the role of supply-side adjustments, that is products may enter the market, exit the market or the quality of existing products may change. We find a remarkably strong response of quality for export prices after the 2015-appreciation in Switzerland, which accounts for more than one third of the change in export prices one year after the shock. Prices for products produced in Switzerland that are sold in the domestic market adjust quality, too, but to a lesser extent. There is no systematic quality adjustment of import prices after the CHF shock. We furthermore show that firms that experience larger drops in imported intermediate input prices improve quality of their exports by more than firms with small changes in intermediate input prices. Firms that compete with imports in the domestic market also improve quality as a response to lower prices of competitors. Currently, we are using transaction level export data to characterize the product groups that drive these quality adjustments. Financial frictions and firm-level outcomes Research Project | 1 Project MembersWe study how firms hire labour and invest in capital stock depending on their financial situation. We find that firms that are financially constrained tend to have larger employment elasticities with respect to demand, whereas financially unconstrained firms tend to hoard labour. These findings can explain the differential response of employment during different crises, where some resulted in large employment losses, whereas others did not. We also study the role of financial fricitions for investments. Preliminary results suggest a relatively large effect (which would suggest a large amplification of business cycles). Exchange-rate pass-through, role of currency for allocations in international trade Research Project | 1 Project MembersThe removal of the lower bound on the EUR/CHF exchange rate in January 2015 provides a unique setting to study the implications of a large and sudden appreciation in an otherwise stable macroeconomic environment. Using transaction-level data on non-durable goods purchases by Swiss consumers, we measure the response of border and consumer retail prices to the CHF appreciation and how household expenditures responded to these price changes. Consumer prices of imported goods and of competing Swiss-produced goods fell by more in product categories with larger reductions in border prices and a lower share of CHF-invoiced border prices. These price changes resulted in substantial expenditure switching between imported and Swiss-produced goods. While the frequency of import retail price reductions rose in the aftermath of the appreciation, the average size of these price reductions fell (and more so in product categories with larger border price declines and a lower share of CHF-invoiced border prices), contributing to low pass-through into import prices. In a separate sub-project, we also study the allocative role of currency of invoicing on exports and find similar dynamics. We furthermore show that exports in larger sectors are less sensitive to exchange rate fluctuations than rather small sectors and that thos sectors, that are less sensitive, have grown over time in Switzerland. 12 12
FV-97 | Firmeninterner Handel und Wechselkurssensitivität der Preise Research Project | 2 Project MembersThis project examines intra-firm trade and its implications for exchange-rate sensitivity of prices.
Shock Transmission and Welfare Effects in Global Production Networks Research Project | 3 Project MembersMost firms engaged in international trade are part of a production network, being a seller and buyer of several products at the same time. These linkages between firms within and across borders expose firms to uncertainty, both directly via their immediate customers and suppliers, and indirectly via their customers' and suppliers' networks of business partners. Importantly, such networks imply heterogeneous responses of firms to upstream or downstream disruptions that depend on the exact structure of their individual value chains. In this project, we empirically study the role of international production networks for the propagation of shocks and the implications for firm behaviour and welfare.In a first part of this research agenda, we will focus on how a firm's reaction to an aggregate shock depends on its international network structure. Using confidential Swiss customs data, proprietary firm data, and a reduced-form event study approach, we will examine the impact of a sudden appreciation of the Swiss Franc in January 2015 on how firms adjusted their export prices (pass-through), quantities, and the average quality of goods exported. The exposure, the extent and the margin of response of any given Swiss exporting firm depends on specific features of its production network, that is, on the share of imported intermediate inputs and on the currency of invoicing of these imports and of their exports. Accordingly, we will study (1) the implications of heterogeneity due to this direct exposure and the interaction between invoicing and a firm's import/export structure. In addition, we measure indirect exposure to the exchange rate shock by means of international and domestic input-output tables to analyse (2) whether indirect exposure to the shock via production networks was quantitatively important.In a second part of the research agenda, we will focus on the propagation of local shocks through the production network. To do so, we rely on a difference-in-differences design where we exploit the staggered introduction of lockdowns during the COVID-19 pandemic over time and space, starting January 2020 in China and followed by lockdowns in Italy and then in northern European countries. These lockdowns led to disruptions of supply chains from the perspective of Swiss firms in the period before Switzerland implemented a partial lockdown itself. Using the same database as above, we study (1) how Swiss companies adjusted their trade flows with existing buyers and suppliers, (2) to what extent they substituted from business partners with local disruptions toward those that were unaffected, and (3) how firm performance was impacted given the modified production network.The results we expect from this research are highly relevant for the literature on supply networks in international macroeconomics. We will also tie together this literature on production networks with the recent literature that highlights the important role of currency choice. It will furthermore deepen our understanding of the effects of the pandemic in a globalised world. In the process, we will also construct a database on transaction-level trade flows that includes firm characteristics and firm balance sheets. We will make all codes and documentation freely available to other researchers who will benefit from reduced start-up costs.
Price indexes during lockdown conditions Research Project | 2 Project MembersUsing online data for prices and real-time debit card transaction data on changes in expenditures for Switzerland allows us to track inflation on a daily basis. While the daily price index fluctuates around the official price index in normal times, it drops immediately after the lockdown related to the COVID19 pandemic. Official statistics reflect this drop only with a lag, specifically because data collection takes time and is impeded by lockdown conditions. Such daily real-time information can be useful to gauge the relative importance of demand and supply shocks and thus inform policymakers who need to determine appropriate policy measures.
Dynamics of real exchange rates and consumer heterogeneity Research Project | 2 Project MembersWe study the dynamics of real exchange rates and how heterogeneity of consumption baskets across countries influences these dynamics. We also analyse the role of purely local goods.
Granularities in inflation rates Research Project | 2 Project MembersWe study the role of large firms in inflation dynamics and in the transmission of inflationary shocks across countries.
Systemic risk evaluation of interconnected banks Research Project | 1 Project MembersThe recent global financial market crisis and the subsequent sovereign debt crisis in the euro zone has led the ECB and other central banks to introduce unconventional monetary policy measures with the aim to restore liquidity in the interbank and bond market across the euro area. Several programmes aimed to improve creditworthiness of banks and together with new regulatory frameworks tried to decrease systemic risk. My research aims to analyse the effects of the ECB's conventional and unconventional monetary policy as well as regulatory effects on the dynamics of systemic risk in the euro-zone from the perspective of financial institutions and markets. Understanding the effects of unconventional policy measures is important because it is very likely that they will become more prevalent in the future. In a low interest rate environment, central banks are constrained by the effective lower bound on nominal interest rates more frequently, making unconventional policies necessary. I will employ a network model in order to understand the dynamics of bank interconnectedness. Macro-prudential regulation views systemic risk as dependent on collective behaviour (endogenous), therefore, a network methodology is essential. I will follow a game theoretical network modelling approach based on Shapley values. Thanks to a unique dataset of interbank liabilities, available at the Swedish Riksbank, I can estimate realistic bank network dynamics, beyond mere simulations, which have been the convention so far due to limited data availability. I will, for the first time, be able to see the time evolution of individual bank's marginal contribution to systemic risk within the changing network structure of the banks, thereby gaining insights into dynamics of the systemic importance of banks. Hence, my network model, which is a macro-prudential approach, will provide valuable input to regulators, policy makers, and academic researchers. In this sense, the results will be highly relevant from a regulatory and supervisory viewpoint.
Consumer heterogeneity and elasticities of subsitution across regions Research Project | 2 Project MembersWe study how consumers switch across regions when the relative price of products between these regions changes. We also study how consumers' inflation rates vary over time and how much of this variation can be explained by differences in income, demand elasticities, and differences in prices paid for the same products.
Product quality adjustments and exchange rates Research Project | 2 Project MembersFirms have various instruments to adjust prices of their products after exchange-rate shocks. While extensive research has been conducted on the aggregate pass-through of exchange-rate changes into prices, we know very little about other means of price adjustment. For this aim, we look at the role of supply-side adjustments, that is products may enter the market, exit the market or the quality of existing products may change. We find a remarkably strong response of quality for export prices after the 2015-appreciation in Switzerland, which accounts for more than one third of the change in export prices one year after the shock. Prices for products produced in Switzerland that are sold in the domestic market adjust quality, too, but to a lesser extent. There is no systematic quality adjustment of import prices after the CHF shock. We furthermore show that firms that experience larger drops in imported intermediate input prices improve quality of their exports by more than firms with small changes in intermediate input prices. Firms that compete with imports in the domestic market also improve quality as a response to lower prices of competitors. Currently, we are using transaction level export data to characterize the product groups that drive these quality adjustments.
Financial frictions and firm-level outcomes Research Project | 1 Project MembersWe study how firms hire labour and invest in capital stock depending on their financial situation. We find that firms that are financially constrained tend to have larger employment elasticities with respect to demand, whereas financially unconstrained firms tend to hoard labour. These findings can explain the differential response of employment during different crises, where some resulted in large employment losses, whereas others did not. We also study the role of financial fricitions for investments. Preliminary results suggest a relatively large effect (which would suggest a large amplification of business cycles).
Exchange-rate pass-through, role of currency for allocations in international trade Research Project | 1 Project MembersThe removal of the lower bound on the EUR/CHF exchange rate in January 2015 provides a unique setting to study the implications of a large and sudden appreciation in an otherwise stable macroeconomic environment. Using transaction-level data on non-durable goods purchases by Swiss consumers, we measure the response of border and consumer retail prices to the CHF appreciation and how household expenditures responded to these price changes. Consumer prices of imported goods and of competing Swiss-produced goods fell by more in product categories with larger reductions in border prices and a lower share of CHF-invoiced border prices. These price changes resulted in substantial expenditure switching between imported and Swiss-produced goods. While the frequency of import retail price reductions rose in the aftermath of the appreciation, the average size of these price reductions fell (and more so in product categories with larger border price declines and a lower share of CHF-invoiced border prices), contributing to low pass-through into import prices. In a separate sub-project, we also study the allocative role of currency of invoicing on exports and find similar dynamics. We furthermore show that exports in larger sectors are less sensitive to exchange rate fluctuations than rather small sectors and that thos sectors, that are less sensitive, have grown over time in Switzerland.
