Let’s take the euro area perspective for a moment: What would have happened to euro area exports to Switzerland if the minimum exchange rate had not been introduced? Given that Switzerland is the euro area’s fourth largest export destination, this is an important question. Moreover, European intermediate goods serve as an important input for Swiss exports worldwide. In the absence of the minimum exchange rate policy, the Swiss franc would have continued to appreciate strongly in an extremely volatile environment, and the risk of Switzerland entering a deflationary trap would have escalated. This would have depressed Swiss aggregate demand and European exports to Switzerland. In short, a policy of deflation avoidance had benefits for both sides in Swiss-European bilateral trade. In addition, given the broad use of the Swiss franc as a funding and credit currency in Europe, the introduction of the minimum exchange rate had a positive impact on financial stability beyond our country’s borders. Switzerland’s economic stability is not just important in the realm of international finance and trade. It should be remembered that Switzerland is the second most important provider of international remittances, directly after the United States. Moreover, in terms of FDI, even the U.S. is a major beneficiary of Swiss investment.
See the following references: Bauer, M. and C. Neely (2013): “International Channels of the Fed’s Unconventional Monetary Policy”, Federal Reserve Bank of San Francisco, Working Paper 2012-12. Glick, R. and S. Leduc (2013): “The Effects of Unconventional and Conventional U.S. Monetary Policy on the Dollar”, Federal Reserve Bank of San Francisco, Working Paper 2013-11. Neely, C. (2010): “The Large-Scale Asset Purchases Had Large International Effects”, Federal Reserve Bank of St. Louis, Working Paper 2010-018C. BIS central bankers’ speeches  1  because asset purchase programs are expected to be scaled back, thereby unleashing a new round of currency tensions. Against the background of currency fluctuations and weak global demand, the problem of global imbalances still lingers. In the debate on global adjustment, there have also been calls for countries with a current account surplus to let their currencies appreciate. For some observers, this includes Switzerland. Our country’s large current account surplus – so the argument goes – is a sure sign that the Swiss franc is too weak. The SNB should therefore abolish the minimum exchange rate and allow the Swiss franc to appreciate further. This in turn would allow the current account surplus to diminish, thereby contributing to global rebalancing.3 I would like to point out that such a critique is not based on a full understanding of Switzerland’s situation. For a comprehensive assessment of the Swiss current account and the Swiss franc, the following factors also need to be considered.