Effect of Exchange Rate Movements on Profit Shifting. The Case of the Swiss Franc

Radulescu, Doina Maria (August 2018). Effect of Exchange Rate Movements on Profit Shifting. The Case of the Swiss Franc (Unpublished). In: Annual Congress International Institute of Public Finance. Tampere, Finland. 2018.

This paper examines the role of exogenous earnings shocks, due to sudden exchange rate movements, on multinationals profit shifting behaviour. We exploit the sudden and unanticipated appreciation of the Swiss Franc vis-a-vis the Euro of around 20%, which occurred on the 15th of January 2015, when the Swiss ThisNational Bank (SNB) discontinued its minimum exchange rate of 1.20 CHF to the Euro. The stylised theoretical model shows that the negative earning shocks on the exporting affiliates located in the low tax country increases the profit shifting incentive of the parent located in the high tax country. We draw on unconsolidated balance sheet data from Orbis and information on the exporting status of individual firms from the KOF Innovation Survey for the time period 2011 to 2016, and distinguish in our empirical exercise between non-exporting vs. exporting Swiss affiliates of multinational firms. Our results suggest that the sudden considerable appreciation of the Swiss Franc, which led to sizable decreasing revenues of Swiss exporting affiliates, translated into reduced declared pre-tax profits of their foreign parent.

Item Type:

Conference or Workshop Item (Speech)


11 Centers of Competence > Center of Comptetence for Public Management (KPM)

UniBE Contributor:

Radulescu, Doina Maria


300 Social sciences, sociology & anthropology > 350 Public administration & military science
300 Social sciences, sociology & anthropology > 330 Economics




Doina Maria Radulescu

Date Deposited:

13 Feb 2019 14:22

Last Modified:

13 Feb 2019 14:22

Uncontrolled Keywords:

Profit shifting; Currency appreciation; Switzerland



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