2018
DOI: 10.2478/jcbtp-2018-0003
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Who put the Holes in the Swiss Cheese? Currency Crisis Under Appreciation Pressure

Abstract: Abstract:We examine the reasons why the SNB gave up the lower floor of the 1.20 CHF/EUR exchange rate arrangement. Three types of shocks played a role: Exogenous shocks to the autonomous component of money demand, interest rate decreases of the ECB, as well as appreciation expectations. In order to defend these shocks, the SNB intervened heavily in the foreign exchange market. This led to an accumulation of reserves in the central bank's balance sheet of the size of 80% of Swiss GDP. Interestingly, the SNB did… Show more

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Cited by 4 publications
(6 citation statements)
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“…This is about double the ratio of the ECB and almost four times the value of the FED. 3 The asset side of the balance sheet is split into the following positions: Gold and receivables from gold transactions, foreign currency holdings, and other assets. Gold and other assets amount to around 55.7 billion CHF and 34.9 billion CHF.…”
Section: The Snb's Balance Sheet and The Key Drivers Of The Lossmentioning
confidence: 99%
See 1 more Smart Citation
“…This is about double the ratio of the ECB and almost four times the value of the FED. 3 The asset side of the balance sheet is split into the following positions: Gold and receivables from gold transactions, foreign currency holdings, and other assets. Gold and other assets amount to around 55.7 billion CHF and 34.9 billion CHF.…”
Section: The Snb's Balance Sheet and The Key Drivers Of The Lossmentioning
confidence: 99%
“…Therefore, in August 2011, the SNB introduced a lower floor exchange rate at 1.20 CHF/EUR (Humpage, 2013). In order to hold the exchange rate at the predetermined level and to cope with tremendous money demand shocks, a zero interest rate policy of the European Central Bank (ECB) and ongoing appreciation pressures, the SNB was forced to drastically intervene in the foreign exchange market (Amador, Bianchi, Bocola and Perriet, 2016; Berthold and Stadtmann, 2018;Berthold and Stadtmann, 2019). The SNB's foreign reserves increased tremendously.…”
Section: Introductionmentioning
confidence: 99%
“…A sharp rise of the total sum of the balance sheet by fxpurchases also increases the exchange rate exposure, which can limit a central bank's financial independence (Ivanović, 2014). However, an increasing exchange rate exposure was actually one reason why the SNB switched to a floating exchange rate system in January 2015 (Berthold and Stadtmann, 2018). In contrast, the ECB increased the sum of its balance sheet in relation to its GDP to a level of almost 40%.…”
Section: Comparison Of Monetary Policies Of the Ecb And The Snb Sincementioning
confidence: 99%
“…Generally, episodes like the Latin American debt crises in the 1980s, the 1987 Black Monday, the 1992-1993 ERM crisis, the 1994-1995 Tequila crisis, the 1997-1998 South East Asian meltdown, the 1998-1999 Brazilian and Russian crisis, the 2000-2001 Turkish crisis, the 2001 Argentine crisis and the 2007-2009 global financial crisis are important phenomena in the world financial market. Moreover, currency crises have had a typical role after the collapse of the Bretton Woods system of fixed exchange rates where overshooting of exchange rate is one of the repeatable events that mainly has monetary root and has been introduced in a monetary framework by Dornbusch (1976) (Yazdani, 2013;Yazdani, Dargahi, & Nikzad, 2017;Yazdani andTayebi, 2013, Berthold andStadtmann, 2018).…”
Section: Introductionmentioning
confidence: 99%