Risk-Off Episodes and Swiss Franc Appreciation: The Role of Capital Flows

Abstract

Abstract During episodes of increased global risk aversion, or risk-off episodes, safe haven currencies such as the Swiss franc tend to appreciate. The immediate impact of a risk-off shock is an increase in net private inflows to Switzerland, mostly driven by a reduction in Swiss residents’ net purchases of foreign debt securities and reduced foreign exposure by Swiss banks. Given that the bulk of capital movements related to risk-off episodes is driven by decisions of Swiss residents, capital flow management policies that discriminate based on the residency of the investor (capital controls) are not likely to be effective at reducing the impact of risk-off episodes. However, prudential policies that limit leveraging or foreign exposure by Swiss banks may diminish the volatility of capital flows during risk-off episodes.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 17 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.