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The effect of exchange rate appreciation on growth: The case of Switzerland

Hult, Mikaela LU (2015) NEKH01 20151
Department of Economics
Abstract
The Swiss franc has had a reputation as a safe haven investment for decades, due to stable economic and political conditions in Switzerland. As a result, capital inflow has been high during times of financial stress around the world, in turn causing appreciating pressure on the real exchange rate. The financial crisis of 2008 was such a period, forcing the Swiss National Bank to peg the Swiss franc to the euro. When the peg was dropped, in January 2015, the markets were shocked and the exchange rate soared in relation to both the euro and the US dollar. This paper examines the effects this dramatic appreciation may have on Switzerland’s rate of output growth, as well as on exports and imports. While the empirical results conclude a... (More)
The Swiss franc has had a reputation as a safe haven investment for decades, due to stable economic and political conditions in Switzerland. As a result, capital inflow has been high during times of financial stress around the world, in turn causing appreciating pressure on the real exchange rate. The financial crisis of 2008 was such a period, forcing the Swiss National Bank to peg the Swiss franc to the euro. When the peg was dropped, in January 2015, the markets were shocked and the exchange rate soared in relation to both the euro and the US dollar. This paper examines the effects this dramatic appreciation may have on Switzerland’s rate of output growth, as well as on exports and imports. While the empirical results conclude a negative effect is to be anticipated, circumstances with possible dampening effects are discussed. (Less)
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author
Hult, Mikaela LU
supervisor
organization
course
NEKH01 20151
year
type
M2 - Bachelor Degree
subject
keywords
exchange rate, overvaluation, growth, Switzerland
language
English
id
7446941
date added to LUP
2015-06-30 15:28:00
date last changed
2015-06-30 15:28:00
@misc{7446941,
  abstract     = {The Swiss franc has had a reputation as a safe haven investment for decades, due to stable economic and political conditions in Switzerland. As a result, capital inflow has been high during times of financial stress around the world, in turn causing appreciating pressure on the real exchange rate. The financial crisis of 2008 was such a period, forcing the Swiss National Bank to peg the Swiss franc to the euro. When the peg was dropped, in January 2015, the markets were shocked and the exchange rate soared in relation to both the euro and the US dollar. This paper examines the effects this dramatic appreciation may have on Switzerland’s rate of output growth, as well as on exports and imports. While the empirical results conclude a negative effect is to be anticipated, circumstances with possible dampening effects are discussed.},
  author       = {Hult, Mikaela},
  keyword      = {exchange rate,overvaluation,growth,Switzerland},
  language     = {eng},
  note         = {Student Paper},
  title        = {The effect of exchange rate appreciation on growth: The case of Switzerland},
  year         = {2015},
}