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Fluctuations in the Swiss Franc: What has Changed Since the Euro's Introduction?

  • Andreas M. Fischer

    ()

    (Swiss National Bank)

The monetary implications arising from EMU for Swiss monetary policy show up primarily in the exchange rate. Until now, fluctuations in the Swiss franc against the euro have been surprisingly moderate. The Swiss franc has thus tracked the euro's decline against the US dollar without experiencing strong inflationary pressure and a convergence in the interest-rate differential: a paradoxical result for a small open economy. This paper examines critically whether the recent record reveals information about a change in SNB monetary policy. It also attemps to shed light on the SNB's ability to implement an independent monetary policy with the new landscape defined by EMU. Four hypotheses of euro tracking are considered.

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Paper provided by Swiss National Bank, Study Center Gerzensee in its series Working Papers with number 02.03.

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Length: 25 pages
Date of creation: Jul 2002
Date of revision:
Handle: RePEc:szg:worpap:0203
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  1. Eichengreen, Barry & Bayoumi, Tamim, 1996. "Ever Closer to Heaven? An Optimum-Currency-Area Index for European Countries," Center for International and Development Economics Research, Working Paper Series qt5dt9501s, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
  2. Rich, Georg, 1997. "Monetary targets as a policy rule: Lessons from the Swiss experience," Journal of Monetary Economics, Elsevier, vol. 39(1), pages 113-141, June.
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  4. Richard Portes & Helene Rey, 1998. "The Emergence of the Euro as an International Currency," NBER Working Papers 6424, National Bureau of Economic Research, Inc.
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  6. Hau, Harald & Killeen, William & Moore, Michael J, 2000. "The Euro as an International Currency: Explaining Puzzling First Evidence," CEPR Discussion Papers 2510, C.E.P.R. Discussion Papers.
  7. Nelson, Daniel B., 1992. "Filtering and forecasting with misspecified ARCH models I : Getting the right variance with the wrong model," Journal of Econometrics, Elsevier, vol. 52(1-2), pages 61-90.
  8. Carmen M. Reinhart, 2000. "Mirage of Floating Exchange Rates," American Economic Review, American Economic Association, vol. 90(2), pages 65-70, May.
  9. Rich, Georg, 1990. "Exchange-rate management under floating exchange rates : A skeptical Swiss view," Journal of Banking & Finance, Elsevier, vol. 14(5), pages 993-1021, November.
  10. Reinhart, Carmen, 2000. "The mirage of floating exchange rates," MPRA Paper 13736, University Library of Munich, Germany.
  11. Georg Rich, 2000. "Switzerland and the euro," Atlantic Economic Journal, International Atlantic Economic Society, vol. 28(3), pages 309-311, September.
  12. Guy Meredith, 2001. "Why Has the Euro Been so Weak?," IMF Working Papers 01/155, International Monetary Fund.
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