Negative Rates and Swiss Export Dynamics: Robust Policy Performance under Varying Interest Rate Volatility

This paper examines how negative interest rate policies affect exports under stochastic inflation, using Switzerland after the global financial crisis as a case study, when safe-haven inflows into the Swiss franc triggered deflationary pressures. Exports are modeled as a function of inflation changes and policy-controlled short rates, with stochastic dynamics for both inflation and interest rate expectations. Monte Carlo simulations and empirical analysis show that while real exports rose only modestly, simulated exports under negative rates increased more strongly, confirming the policy’s effectiveness in supporting trade. Results further indicate that simulated exports are largely invariant to the Hurst parameter of interest rate volatility. Policy efficiency is thus robust: it works regardless of short- or long-memory volatility. JEL Classification. F41, E52, C15