The Swiss National Bank (SNB) announced a peg with the euro on September 6th, 2011: with immediate eject, it will
no longer tolerate a EUR/CHF exchange rate below one Swiss franc twenty. The SNB
will enforce this minimum rate with the utmost determination. It is prepared to purchase
foreign exchange in unlimited quantities’ The exchange rate between the Swiss franc and
the euro have been stable around 1.2 Swiss franc per euro.
On January 15th, 2015, the Swiss National Bank abandoned the peg in its statement:
the euro has depreciated considerably against the US dollar and this, in turn, has caused
the Swiss franc to weaken against the US dollar. In these circumstances, the SNB concluded
that enforcing and maintaining the minimum exchange rate for the Swiss franc against the
euro is no longer justified this statement sent the Swiss franc soared (appreciated) against
the euro.
Please collect your own references and resources to answer the following questions. List
your references properly.
(a) Find and plot the quarterly exchange rate between Swiss franc (CHF) and the euro
as CHF per euro between 2010Q1 and 2015Q4. Briefly describe how the value of the Swiss
franc changed during the sample period.
(b) In this event, the abandon of the peg by the Swiss National bank led to an appreciation of the Swiss franc. Some economists call such an event reverse speculative attacker.
Explain in what sense this event is a reversed speculative attacker
Sample Solution
.
