Regime-dependent drivers of the EUR/CHF exchange rate

Piotr Kotlarz (), Michael Hanke () and Sebastian Stöckl
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Piotr Kotlarz: University of Liechtenstein
Michael Hanke: University of Liechtenstein

Swiss Journal of Economics and Statistics, 2023, vol. 159, issue 1, 1-18

Abstract: Abstract We analyze drivers of the EUR/CHF exchange rate in different regimes between 2000 and 2020. Structural breaks between these subperiods are estimated in an integrated way together with the drivers that are relevant during these subperiods. Overall, the main drivers of the exchange rate include European equity and volatility indices, interest rate and term structure slope differentials, as well as monetary policy interventions. For the “peg period” September 2011–January 2015, in addition to the observed exchange rate we also analyze the drivers of the latent exchange rate that could have been observed in the absence of the peg. Interestingly, the SNB’s foreign currency investments became a significant driver of the EUR/CHF exchange rate only after the end of the peg period when there was no longer an officially communicated target rate.

Keywords: Exchange rate drivers; Monetary policy; EUR/CHF exchange rate; Foreign currency interventions; Latent exchange rate (search for similar items in EconPapers)
JEL-codes: E44 F31 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1186/s41937-023-00107-w

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