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Table 4 The Role of Central Banks’ Sovereign Debt Purchases and the Exchange Rate

From: Understanding Swiss real interest rates in a financially globalized world

 

(1)

(2)

(3)

(4)

OLS

OLS

OLS

OLS

\(\Delta (\text {Debt/GDP})_{CH}\)

−16***

−16***

−16***

−12***

(2.5)

(2.4)

(2.6)

(2.7)

\(\Delta (\text {Debt/GDP})_{j}\)

2.6***

2.8***

2.7***

2.3***

(.6)

(.62)

(.75)

(.72)

\(i_{CH}-i_j\)

.069***

.066***

.092***

.11***

(.012)

(.012)

(.013)

(.014)

\(\log (VIX)\)

.092***

.095***

.035

.055

(.033)

(.033)

(.037)

(.039)

\(\log \left( \frac{\text {Real GDP}_{CH}}{\text {Real GDP}_{j}}\right)\)

2.8***

2.7***

3.7***

4.1***

(.24)

(.25)

(.28)

(.31)

\(\Delta \log (CB/GDP)_{j}\)

 

−.07***

−.07***

−.059***

 

(.016)

(.017)

(.019)

\(\Delta \log \left( \frac{\text {ECB assets}}{GDP_{EA12}}\right) \#(j=EURO)\)

 

−.58**

−.67**

−.51**

 

(.25)

(.26)

(.25)

\(\tau _t\)

  

.12*

.089

  

(.061)

(.062)

\(s_{t-1,j}\)

   

.44***

   

(.14)

\(\Delta (FX/GDP)_{CH}\)

   

−.55*

   

(.32)

Observations

602

602

507

507

R-squared

0.76

0.76

0.78

0.79

Quad. trend

Yes

Yes

Yes

Yes

Country FE

Yes

Yes

Yes

Yes

  1. See the note of Table 3. The logs of the ratio of CB holdings to GDP and of the ratio of ECB assets to GDP are multiplied by 100, so that the coefficients read as the effect of a 1-percent increase in these ratios. \(\tau\) is the deviation from CIP defined in Eq. (5). An increase in the log exchange rate \(s_{t-1,j}\) means that the Swiss franc depreciates vis-à-vis the other currency. The log exchange rate is multiplied by 100, so that the coefficient reads as the effect of a 1-percent depreciation in the Swiss franc. The ratio of foreign exchange (FX) reserves to GDP is also multiplied by 100, so that the coefficient reads as the effect of an increase in FX reserves equivalent to 1% of GDP
  2. Standard errors in parentheses
  3. *\(\textit{p}<0.1\), **\(\textit{p}<0.05\), ***\(\textit{p}<0.01\)