Export Sophistication and Exchange Rate Elasticities: The Case of Switzerland

Willem Thorbecke and Atsuyuki Kato

Discussion papers from Research Institute of Economy, Trade and Industry (RIETI)

Abstract: In 2011, Switzerland announced a floor for the Swiss franc, and it immediately depreciated by 10 percent. Many argue that depreciations should not matter for Switzerland's export basket because luxury brands and high value added products predominate, and these should compete on quality rather than price. We measure the sophistication of Swiss exports using Hausmann et al.'s (2007) and Kwan's (2002) measures and find them to be the most sophisticated in the world. We also estimate export equations and find price elasticities exceeding unity. These findings run counter to the claim that countries exporting high end goods should have low exchange rate elasticities.

Pages: 27 pages
Date: 2014-06
New Economics Papers: this item is included in nep-int and nep-opm
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Persistent link: https://EconPapers.repec.org/RePEc:eti:dpaper:14031

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