Some implications of the new agreement on the distribution of SNB profits

I simulate the distribution of SNB profits to the Confederation and Cantons under a hypothetical scenario, in which the new agreement between the Swiss National Bank and the Federal Department of Finance would have been in place from 2005-2019. All else equal, the new agreement leads to: (i) a higher average profit distribution; (ii) larger annual fluctuations of profit distributions, complicating fiscal authorities' budget planning; (iii) pro-cyclical profit distributions (lower [higher] during economic recessions [booms]). Having said that, the SNB's profit distributions account for a relatively modest share of total government expenditures. In addition, to offset the volatile and pro-cyclical profit distributions, fiscal authorities may borrow on capital markets.