Year: 2015
Type: article
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.
Source: German Economic Review
DOI: 10.1111/geer.12063
Author: Irineu de Carvalho Filho
Institution: International Monetary Fund
Language: English
Subfield: Finance
Domain: Social Sciences
Open Access status: green
Funder: Georgetown University
OpenAlex ID: W2062228039