Switzerland: Selected Issues
IMF Staff Country Reports, June 26, 2019
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- Switzerland: Selected Issues
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Bibliographic details
- Published: June 26, 2019
- Series: IMF Staff Country Reports
- DOI: https://doi.org/10.5089/9781498321501.002
Overview
- Models the evolving behavior of the Swiss franc relative to the world’s major reserve currencies.
- Considers possible reasons for shifts in franc behavior, including:
- Economic fundamentals (country-partners and currency of denomination of Swiss trade and finance).
- The global financial crisis and its aftermath.
- The shift from synchronized to divergent monetary policies by the major central banks.
- The approach identifies how the franc co-moves with the major reserve currencies but is agnostic about the driving forces behind these moves.
- Emphasizes that identifying reserve currency blocks and the de facto behavior of currencies is an ongoing pursuit.
Key findings on franc behavior
- Economic fundamentals are likely to affect which currencies the franc co-moves with, although these factors tend to change only slowly.
- The behavior of the Swiss franc may have been affected by:
- The global financial crisis and its aftermath.
- Recent shifts from synchronized to divergent monetary policies by major central banks.
- The two dimensions of exchange regimes—the anchor currency (basket) and the degree of exchange rate flexibility—should be identified simultaneously.
- The implied regimes from the analysis align well with Switzerland’s de facto exchange rate arrangements and monetary policy frameworks.
Methodology and analytical stance
- The paper models co-movement of the Swiss franc with major reserve currencies.
- The approach identifies reserve currency blocks and de facto currency behavior without attributing causality to specific driving forces.
- Stresses simultaneous identification of:
- The anchor currency (basket).
- The degree of exchange rate flexibility.
Policy relevance and implications
- Understanding which currencies the franc co-moves with informs assessment of Switzerland’s de facto exchange rate arrangements and monetary policy framework.
- Recognizes slow-moving economic fundamentals as a constraint on rapid shifts in co-movement patterns.
- Highlights the potential role of global financial shocks and central-bank policy divergence in altering franc behavior, underscoring the importance of monitoring international monetary conditions.
International Monetary Fund. European Dept. "Switzerland: Selected Issues", IMF Staff Country Reports 2019, 181 (2019), accessed 9/10/2026, https://doi.org/10.5089/9781498321501.002
Content in this bundle
- Switzerland: Selected Issues; IMF Country Report No. 19/181; June 4, 2019