Open Access

Ina Kastner

• The Swiss National Bank (SNB) abolished the minimum exchange rate between the Swiss Franc and the Euro of 1.20 CHF/€ at the beginning of 2015. The ensuing appreciation of the Franc against the Euro was not to be without consequences. This Bachelor´s thesis examines these consequences and to whom they may apply on the basis of a wide range of literature. Firstly, the author explains the theoretical basics of exchange rates, from the different exchange rate regimes to the appreciation and depreciation of currencies. The following chapter deals with background information of the Swiss Franc and the minimum exchange rate. Furthermore, this thesis looks at the consequences of the abolition of the minimum exchange rate and focuses, amongst other things, for example on the economy in Switzerland and the bordering Euro countries. The last part consists of a conclusion. Since the beginning of World War I, and through economic and political stability, the Swiss Franc became stronger and stronger and finally became a safe-haven-currency. During the financial crisis Switzerland received huge capital imports. To stop the on-going appreciation of the Franc, the SNB introduced the minimum exchange rate in 2011 which lasted until January 2015. For reasons like a weakening Euro and the announcement of the ECB´s quantitative easing, the SNB decided to let the Franc float freely again as it would have been too expensive for the SNB to keep the exchange rate constant at 1.20 CHF/€. Swiss exporters and hoteliers are affected by the consequences of this decision as their goods and hotel prices have become much more expensive for clients from the Euro area. The Swiss retail in the bordering area loses its clients to the other countries as they can shop cheaper over there. And everyone who has a loan or mortgage denominated in Swiss Francs and without having insured the exchange rate risk will have to pay back higher interest and loan amount. Hence,this Bachelor´s Thesis came to the conclusion that the negative consequences for the Swiss economy are still strong but the Franc devalued subsequently through a lower attractiveness and the negative interest rates which the SNB established.