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

Laura Felber

No 2025-09, Working Papers from Swiss National Bank

Abstract: This paper examines the effects of exchange rate fluctuations on cross-border consumer spending in small open economies. Exploiting a large, unexpected and persistent central bank-induced exchange rate appreciation and drawing on a unique dataset of over 500 million anonymized debit and credit card transactions, I document a substantial and immediate impact on both cross-border shopping by domestic consumers and tourism spending by foreign consumers. The strongest spending adjustments are observed among domestic consumers living near the border and foreign consumers from neighboring countries. Furthermore, foreign consumers from neighboring countries exhibit high exchange rate sensitivity on both the extensive and intensive margins 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 and central bankers, especially in small open economies where the exchange rate channel is an important channel of monetary policy transmission.

Keywords: Exchange rates; Consumption; Monetary policy; Exchange rate channel; Heterogeneity; Transaction payments data; Tourism; Event study (search for similar items in EconPapers)
JEL-codes: D12 E21 E52 E58 F14 F41 R11 Z30 (search for similar items in EconPapers)
Pages: 74 pages
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:snb:snbwpa:2025-09

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