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Exchange Rate and Regional Divergences: The Swiss Case

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Abstract

From 1975 to 1995, the Swiss franc appreciated in a near constant manner compared with the currencies of all of the country’s commercial partners. This paper will seek to demonstrate that the various regions in Switzerland evolve diVerently when faced with a continuously appreciating currency. The paper is not in the nature of an econometric study and will not seek to quantify the gains and losses of each region, but it will view their structural evolution via the eVect of the exchange rates. Faced with the appreciation of the Swiss franc and based on their productive specialities, some regions suVer badly from this, whilst others cope with it and even thrive on it. It is thus possible to openly question the consequences of the Swiss National Bank’s monetary policy: has domestic industry been sacri? ced in favour of ? nancial activities? Is the continuous rise of the Swiss franc increasing regional disparities in Switzerland? The paper ? rst discusses the theories that establish a link between the exchange rate and the evolution of regional production systems. All these theories draw conclusions that can vary radically. Furthermore, they are usually based on the assumption of homogenous national territories. The second part contains a description of the methodology applied, which is based on the concept of regional production systems (RPSs). The impact of the exchange rate on RPSs is explained by means of three criteria: sectorial specialization and basic source of income within RPSs; the presence or absence of large ? rms; and the innovative capacity of the RPSs. The third part of the paper illustrates ? ve examples of RPSs, each of which has evolved in a radically diVerent way over the relevant period. Lastly, a link is established between the regional divergences and the evolution of the exchange rate in the whole of Switzerland from 1975 to 1995. The conclusion draws a parallel between the evolution in Switzerland and the tensions that could arise between the regions and the nations constituting the Euro zone.

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Bibliographic Info

Paper provided by GRET Group of Research in Territorial Economy, University of Neuchâtel in its series GRET Publications and Working Papers with number 08-02.

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Length: 16 pages
Date of creation: Aug 2002
Date of revision:
Publication status: Published in Regional Studies, August 2002, Volume 36, Issue 6, Pages 611-626
Handle: RePEc:nct:wpaper:08-02

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Keywords: Exchange rate; Optimal monetary zone; Regional production systems; Industrial regions; Tourist regions; Financial centres; Euroland;

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  1. Ron Martin, 2001. "EMU versus the regions? Regional convergence and divergence in Euroland," Journal of Economic Geography, Oxford University Press, vol. 1(1), pages 51-80, January.
  2. Camille Baulant & Michel Aglietta, 1994. "Contrainte extérieure et compétitivité dans la transition vers l'union économique et monétaire," Revue de l'OFCE, Programme National Persée, vol. 48(1), pages 7-54.
  3. Michel Aglietta & Camille Baulant, 1994. "Contrainte extérieure et compétitivité dans la transition vers l'union économique et monétaire," Revue de l'OFCE, Presses de Sciences-Po, vol. 0(1), pages 7-54.
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Cited by:
  1. Olivier Crevoisier & Frédéric Quiquerez, 2004. "Integration of control relations in the problematic of competition between regions," ERSA conference papers ersa04p419, European Regional Science Association.
  2. José Corpataux & Olivier Crevoisier, 2005. "Increased Capital Mobility/Liquidity and its Repercussions at Regional Level," GRET Publications and Working Papers 10-05, GRET Group of Research in Territorial Economy, University of Neuchâtel.

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