The Demise of the Swiss Interest Rate Puzzle
In this paper we analyzed the violations of UIP for the Swiss Franc against the Dollar, the Euro, the Yen, the Pound and the Canadian Dollar using recent data up to fall 2008. This exercise provides the following main results : first the Swiss interest rate puzzle disappeared, i.e. mean returns on Swiss Franc assets are no longer systematically and significantly lower (as in the 1980 - 1998 sample) when compared jointly with other major currencies in the 1999 to 2008 period. Second and in contrast to earlier evidence we failed to find evidence that geopolitical crises lead to an appreciation of the Swiss Franc in the last ten years. Third even the short run validity of UIP cannot be rejected for the Swiss Franc against the five currencies for the 1999 - 2008 sample. Unfortunately our attempt to locate the time of change and the currencies involved by the application of tests for structural breaks with unknown break point did not lead to clear cut conclusion for the Euro and the Dollar, the two most important foreign currencies from a Swiss perspective.
|Date of creation:||2009|
|Contact details of provider:|| Postal: Peter-Merian-Weg 6, Postfach, CH-4002 Basel|
Web page: http://wwz.unibas.ch
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Perron, P. & Bai, J., 1995.
"Estimating and Testing Linear Models with Multiple Structural Changes,"
Cahiers de recherche
9552, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- Jushan Bai & Pierre Perron, 1998. "Estimating and Testing Linear Models with Multiple Structural Changes," Econometrica, Econometric Society, vol. 66(1), pages 47-78, January.
- Perron, P. & Bai, J., 1995. "Estimating and Testing Linear Models with Multiple Structural Changes," Cahiers de recherche 9552, Universite de Montreal, Departement de sciences economiques.
- Kugler, Peter & Weder, Beatrice, 2002. "The puzzle of the Swiss interest rate island : stylized facts and a new interpretation," HWWA Discussion Papers 168, Hamburg Institute of International Economics (HWWA).
- Philippe Jorion & William N. Goetzmann, 1999. "Global Stock Markets in the Twentieth Century," Journal of Finance, American Finance Association, vol. 54(3), pages 953-980, 06.
When requesting a correction, please mention this item's handle: RePEc:bsl:wpaper:2009/04. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (WWZ)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.