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Monetary determinants of the Swiss franc

  • Carlos Lenz
  • Marcel Savioz

This paper looks into the determinants of the Swiss franc exchange rate against the euro. Based on the monetary approach to exchange rates, we start from the premise that monetary policy has an influence on the exchange rate. To measure this effect, we apply the structural vector-autoregression methodology on a set of Swiss macroeconomic variables and the euro area interest rate. Overall, we find that Swiss monetary policy contributes between 7 and 15% to variations of the exchange rate between 1981 and 2008. Focusing on the episode between 2003 and 2005 we attribute more than half of the depreciation of the franc to Swiss monetary policy.

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File URL: http://www.snb.ch/n/mmr/reference/working_paper_2009_16/source/working_paper_2009_16.n.pdf
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Paper provided by Swiss National Bank in its series Working Papers with number 2009-16.

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Length: 28 pages
Date of creation: 2009
Date of revision:
Handle: RePEc:snb:snbwpa:2009-16
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  1. repec:dgr:uvatin:19980082 is not listed on IDEAS
  2. Cushman, David O. & Zha, Tao, 1997. "Identifying monetary policy in a small open economy under flexible exchange rates," Journal of Monetary Economics, Elsevier, vol. 39(3), pages 433-448, August.
  3. Tanya Molodtsova & Alex Nikolsko‐Rzhevskyy & David H. Papell, 2011. "Taylor Rules and the Euro," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43, pages 535-552, 03.
  4. Michael Artis & Michael Ehrmann, 2000. "The Exchange Rate -a Shock-Absorber or Source of Shocks? A Study of Four Open Economies," EUI-RSCAS Working Papers 38, European University Institute (EUI), Robert Schuman Centre of Advanced Studies (RSCAS).
  5. Valerie Cerra & Sweta Chaman Saxena, 2008. "The Monetary Model Strikes Back; Evidence From the World," IMF Working Papers 08/73, International Monetary Fund.
  6. Angelo Ranaldo & Paul Söderlind, 2007. "Safe Haven Currencies," University of St. Gallen Department of Economics working paper series 2007 2007-22, Department of Economics, University of St. Gallen.
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