Swiss Journal of Economics and Statistics

, Volume 151, Issue 4, pp 299–331 | Cite as

Determinants of the Swiss Franc Real Exchange Rate

  • Tommaso Mancini Griffoli
  • Christoph Meyer
  • Jean-Marc Natal
  • Attilio Zanetti
Open Access


We conduct an empirical investigation of the determinants of the Swiss franc real exchange rate. Theory and related empirical papers suggest various specific factors as potential determinants We select some of these factors, and test their significance and magnitude in affecting the course of the CHF real exchange rate. Results stemming from a co-integration approach point to terms of trade and relative government spending as the most significant explanatory variables. Balassa-Samuelson effects do not play any significant role. Our results also confirm that this kind of empirical approach is sensitive to the choice of explanatory variables, panel countries and sample periods.

JEL Classification

C33 F31 


real exchange rate Swiss franc government consumption terms of trade net foreign assets GDP per capita Balassa-Samuelson productivity DOLS 


  1. Adler, Konrad, and Christian Grisse (2014), “Robustness of Estimates of Swiss Franc Equilibrium Exchange Rates to Alternative Modelling Assumptions”, SNB Working Paper, N. 7.Google Scholar
  2. Balassa, Bela (1964), “The Purchasing Power Parity Doctrine: A Reappraisal”, Journal of Political Economy, 72(6), pp. 584–596.CrossRefGoogle Scholar
  3. Baltagi, B. H., and C. Kao (2000), “Nonstationary Panels, Cointegration in Panels and Dynamic Panels: A Survey”, in Advances in Econometrics: Nonstationary Panels, Panel Cointegration and Dynamic Panels, B. H. Baltagi, T B. Fomsby and R.C. Hill, eds., Vol. 15, Oxford, Elsevier, pp. 7–51.CrossRefGoogle Scholar
  4. Bergstrand, Jeffrey H. (1991), “Structural Determinants of the Real Exchange Rate and National Price Levels: Some Empirical Evidence”, The American Economic Review, 81(1), pp. 325–334.Google Scholar
  5. Brunetti, Aymo (2008), “Die Wachstumspolitik des Bundes: Rückblick und Ausblick”, Die Volkswirtschaft, N. 4, pp. 4–7.Google Scholar
  6. Brunetti, Aymo (2004), “Vom Wachstumsbericht zum Wachstumspaket”, Die Volkswirtschaft, N. 5, pp. 9–14.Google Scholar
  7. Bussiere, Matthieu, Michele Ca’ Zorzi, Alexander Chudik, and Alistair Dieppe (2010), “Methodological Advances in the Assessment of Equilibrium Exchange Rates”, ECB Working Paper no. 1151.Google Scholar
  8. De Bock, Reinout, and Irineu de Carvahlo Fihlo (2013), “The Behavior of Currencies during Risk-Off Episodes”, IMF Working Paper no. 13/8.Google Scholar
  9. De Gregorio, José, Alberto Giovannini, and Holger Wolf (1994), “International Evidence on Tradables and Nontradables Inflation”, European Economic Review, 38, pp. 1225–1244.CrossRefGoogle Scholar
  10. Dornbusch, Rudiger (1980), Open Economy Macroeconomics, Basic Books, New York.Google Scholar
  11. Engel, Charles M. (1999), “Accounting for U. S. Real Exchange Rate Changes”, Journal of Political Economy, 107, pp. 507–537.CrossRefGoogle Scholar
  12. Hamilton, James D. (1994), Time Series Analysis, Princeton University Press.Google Scholar
  13. Hayashi, Fumio (2000), Econometrics, Princeton University Press.Google Scholar
  14. International Monetary Fund (2013), External Balance Assessment (EBA) Methodology: Technical Background, Research Department.Google Scholar
  15. International Monetary Fund (2006), Methodology for CGER Exchange Rate Assessments, Research Department.Google Scholar
  16. Johansen, Soren (1995), Likelihood-Based Inference in Cointegrated Vector Autoregressive Models, Oxford University Press.CrossRefGoogle Scholar
  17. Kao, C., M. H. Chiang, and B. Chen (1999), “International R&D Spillovers: An Application of Estimation and Inference in Panel Cointegration”, Oxford Bulletin of Economics and Statistics, 61(1), pp. 691–709.CrossRefGoogle Scholar
  18. Kohli, Ulrich (2004), Real GDP, “Real Domestic Income and Terms of Trade Changes”, Journal of International Economics, 62, pp. 83–106.CrossRefGoogle Scholar
  19. Lane, Philip, and Gian Maria Milesi-Ferretti (2002), “External Wealth, the Trade Balance and the Real Exchange Rate”, European Economic Review, 46(6), pp. 1049–1071.CrossRefGoogle Scholar
  20. Lane, Philip R., and Gian Maria Milesi-Ferretti (2006), “The External Wealth of Nations Mark II: Revised and Extended Estimates of Foreign Assets and Liabilities”, pp. 1970–2004, IMF Working Paper, No. 06/69.Google Scholar
  21. Lee, Jaewoo, Gian Maria Milesi Ferretti, and Luca Antonio Ricci (2008), “Real Exchange Rates and Fundamentals: A Cross-Country Perspective”, IMF Working Paper, No. 08/13.Google Scholar
  22. Lenz, Carlos, and Marcel Savioz (2009), “Monetary Determinants of the Swiss Franc”, SNB Working Paper, no. 16.Google Scholar
  23. Mark, N., and D. Sul (2003), “Cointegration Vector Estimation by Panel Dols and Long Run Money Demand”, Oxford Bulletin of Economics and Statistics, 65, pp. 665–680.CrossRefGoogle Scholar
  24. Neary, Peter (1988), “Determinants of the Equilibrium Real Exchange Rate”, The American Economic Review, 78(1), pp. 210–215.Google Scholar
  25. Ostry, Jonathan D. (1994), “Government Purchases and Relative Prices in a Two-Country World”, Economic Record, 70, 209, pp. 149–161.CrossRefGoogle Scholar
  26. Phillips, P., and H. Moon (2000), “Non-Stationary Panel Data Analysis: An Overview of some Recent Developments”, Econometric Reviews, 19(3), pp. 263–286.CrossRefGoogle Scholar
  27. Phillips, P., and H. Moon (1999), “Linear Regression Limit Theory for Nonstationary Panel Data”, Econometrica, 67(5), pp. 1057–1111.CrossRefGoogle Scholar
  28. Ranaldo, Angelo, and Paul Soederlind (2010), Safe Haven Currencies, Review of Finance, 14, pp. 385–407.CrossRefGoogle Scholar
  29. Reynard, Samuel (2008), “What Drives The Swiss Franc”, SNB Working Paper, no. 14Google Scholar
  30. Rogoff, Kenneth (1996), “The Purchasing Power Parity Puzzle”, Journal of Economic Literature, 34(2), pp. 647–668.Google Scholar
  31. Saikkonen, P. (1991), “Asymptotically Efficient Estimation of Cointegration Regressions”, Econometric Theory, 7, pp. 1–21.CrossRefGoogle Scholar
  32. Samuelson, Paul A. (1964), “Theoretical Notes on Trade Problems”, Review of Economics and Statistics, 46(2), pp. 145–154.CrossRefGoogle Scholar
  33. Stock, James H., and Mark W Watson (1993), “A Simple Estimator of Cointegrating Vectors in Higher Order Integrated Systems”, Econometrica, 61, pp. 783–820.CrossRefGoogle Scholar
  34. Taylor, Alan M., and Mark P. Taylor (2004), “The Purchasing Power Parity Debate, Journal of Economic Perspectives”, 18(4), pp. 135–158.CrossRefGoogle Scholar

Copyright information

© Swiss Society of Economics and Statistics 2015

Authors and Affiliations

  • Tommaso Mancini Griffoli
    • 1
  • Christoph Meyer
    • 2
  • Jean-Marc Natal
    • 3
  • Attilio Zanetti
    • 4
  1. 1.Money and Capital Markets DepartmentInternational Monetary FundWashington DCUSA
  2. 2.Foreign Exchange and Gold UnitSwiss National BankZurichSwitzerland
  3. 3.Research DepartmentInternational Monetary FundWashington DCUSA
  4. 4.Economic Analysis UnitSwiss National BankZurichSwitzerland

Personalised recommendations