Monetary Determinants Of The Swiss Franc

This paper looks into the determinants of the Swiss franc exchange rate against the euro. Based on the monetary approach to exchange rates, the authors start from the premise that monetary policy has an influence on the exchange rate. To measure this effect, they apply the structural vector auto-regression methodology on a set of Swiss macroeconomic variables and the euro area interest rate. Overall, they 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 they attribute more than half of the depreciation of the franc to Swiss monetary policy.