The Swiss central bank last week abandoned its euro exchange rate ceiling. This column argues that the fallout from the decision demonstrates the inherent weaknesses of the regulator-approved standard risk models used in financial institutions. These models under-forecast risk before the announcement and over-forecast risk after the announcement, getting it wrong in all states of the world.
Jon Danielsson, Sunday, January 18, 2015
Reto Foellmi, Isabel Martínez, Sunday, August 31, 2014
Switzerland has had consistently low tax rates and a remarkably stable income distribution, although in the last 20 years the share of top incomes has risen. This column documents that the top 0.01%’s share doubled, meaning Switzerland is similar to European countries in terms of the top 1%’s income share, but closer to the US for higher top incomes. Labour incomes have grown in importance among top income earners. At the same time, however, top incomes have exhibited large and possibly increasing variations over the business cycle.
Patricia Funk, Christina Gathmann, Friday, February 10, 2012
As debt crises hit on both sides of the Atlantic, a safe haven for many investors has been Switzerland. This column looks at Swiss public spending over the last century and argues that one reason for its low debt may be its greater use of direct democracy, where people vote on individual policies, as opposed to representative democracy, where people elect others to make decisions on their behalf.
Bruce Blonigen, Lindsay Oldenski, Nicholas Sly, Saturday, November 26, 2011
The most recent G20 summit led to a multilateral agreement to facilitate information sharing between tax agencies, with the US currently negotiating bilateral tax treaties with the tax havens of Switzerland and Luxembourg. But before celebrations begin, this column points out that cracking down on tax evasion comes at a cost. International investment may well suffer.
Raphael Auer, Sébastien Kraenzlin, Thursday, March 31, 2011
Banks across the globe have a high balance-sheet exposure to foreign currencies. During the panic of the global financial crisis, the private supply of cross-border liquidity came to a halt, requiring government action. This column documents the unmet demand for cross-border liquidity for the case of the Swiss Franc and describes the countermeasures that were adopted by the Swiss authorities.
Cédric Tille, Thursday, March 12, 2009
The biggest risk facing the Swiss economy is its large financial sector with substantial international exposure. Foreign currencies, mostly held by UBS and Credit Suisse, account for nearly two-thirds of banks’ balance sheets – an amount equivalent to four times annual GDP. This column suggests splitting the two large banks’ domestic and foreign operations, so that losses on the latter do not jeopardise the domestic financial system.
Patricia Funk, Friday, November 28, 2008
Patricia Funk of the Universitat Pompeu Fabra talks to Romesh Vaitilingam about her research on the impact of direct democracy on government spending, which draws on over a hundred years of data on the cantons of Switzerland. The interview was recorded at the annual congress of the European Economic Association in Milan in August 2008.