The Macro-Stability of Swiss WIR-Bank Credits: Balance, Velocity, and Leverage

Abstract

Since 1934, the Swiss Wirtschaftsring/Cercle Economique (Economic Circle), now the WIR-Bank, has issued its own currency, not backed by Swiss Francs. Turnover in WIR is countercyclical: firms use it more in a recession. A money-in-the-production-function model implies that this spending arises through larger WIR Balances for larger firms, but greater WIR Velocity for smaller ones. Panel data by industrial sector confirm this pattern, similar to commercial trade credits, a major source of non-bank credit. The countercyclical multiplier on WIR expenditures is highly leveraged, and its impact on the Swiss Economy greater than its turnover would suggest.