Exchange rates and cross-border consumer spending: Evidence from retail payments data

Laura Felber

Journal of International Money and Finance, 2026, vol. 162, issue C

Abstract: This paper examines the effects of exchange rate fluctuations on cross-border consumer spending in small open economies. Exploiting an unexpected and persistent central bank-induced exchange rate appreciation of more than 20% and drawing on a unique dataset of over 500 million anonymized debit and credit card transactions, I document a substantial and immediate impact on consumer spending. While cross-border shopping by domestic consumers is estimated to have increased by 4% in the quarter of the shock, tourism spending by foreign consumers declined by up to 9%. The strongest spending adjustments are observed among domestic consumers living near the border and foreign consumers from neighboring countries. The latter exhibit high exchange rate sensitivity on both the extensive and intensive margins, with an overall elasticity of 0.66, and shift their consumption from higher- to lower-value goods and services. These findings suggest significant substitution effects in consumption on impact and emphasize the important role of cross-border shopping in small open economies. The paper provides insights for policymakers, especially in small open economies where exchange rates, via the trade channel, are a key determinant of economic activity.

Keywords: International economics; Exchange rates; Trade channel; Consumption; Heterogeneity; Transaction payments data; Tourism; Event study (search for similar items in EconPapers)
JEL-codes: D12 E21 E58 F14 F41 R11 Z30 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jimfin:v:162:y:2026:i:c:s0261560626000100

DOI: 10.1016/j.jimonfin.2026.103525

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