Not only are the pharmaceutical industry and merchanting relatively insensitive to exchange rate fluctuations; they are also much more important for the development of the current account than for the economy as a whole. This can be seen, for example, in employment statistics. The pharmaceutical industry and merchanting companies together employed approximately 50,000 people here in Switzerland in 2016. By contrast, the exchange rate-  8  Merchanting is defined as the purchase of goods in a third country and the subsequent resale of the same goods to another third country. The goods are neither imported into nor exported from the country. Page 10/13  sensitive industries of the other five goods categories pictured here accounted for more than 325,000 employees. 9 In sum, three special factors are particularly responsible for Switzerland’s persistently high current account surplus. First, statistical distortions lead to the current account surplus in Switzerland being overstated. These distortions can be attributed to special ownership structures of multinational companies in Switzerland as well as lower inflation rates in Switzerland than abroad. Second, after correcting for these distortions, the current account surplus can be explained by the ageing population and a well-funded occupational pension system. Third, the current account is dominated by two industries which are relatively insensitive to the exchange rate and which are much more important for the development of the current account than for the economy as a whole.
How can the persistent current account surplus, textbook economic theory and the SNB’s own assessment be reconciled? Is the surplus in Switzerland perhaps even the result of a monetary policy designed to deliberately push down the exchange rate in order to boost exports? 1 International debate about certain countries’ current account surpluses and unfair exchange rate policy has intensified in recent years. In this context, Switzerland has been on the US Treasury’s ‘monitoring list’ since 2016, although it is not designated a ‘currency manipulator’ in the associated report as it does not meet all the relevant criteria. However, Switzerland is being specially monitored. We are maintaining a constructive dialogue on this matter with the responsible government agencies in the US. Foreign authorities and international organisations recognise Switzerland’s special position, and appreciate the rationale for the SNB’s monetary policy measures. According to the latest External Sector Report of the International Monetary Fund (IMF) of July 2017, Switzerland’s current account is in line with macroeconomic conditions, and its monetary and fiscal policy is considered appropriate. Yet, international debate about current account surpluses and deficits has at times been heated and not always objective. Some observers have repeatedly denounced Switzerland for its persistent surplus. As criticism has focused on the SNB’s monetary policy, I am naturally keen to give you my analysis of the situation. Before we get into the details, let me outline the crux of my argument.