Econ 335 International Finance

Q&A Homework for Econ 335 International Finance

The writeup needs to be around 3 pages of double spaced size 12 text. Include graphs were applicable.

Please be as detailed as possible. The following are the instructions and questions as required-

Read the posted article “As Swiss Economy Blooms, Central Bank Presents a Quandary,” from the March 15, 2018 Wall Street Journal (author Brian Blackstone) about the most recent policy decision by the Swiss National Bank (SNB), Switzerland’s central bank.Please note: Switzerland currently floats its currency. Then answer the following questions about the article.

Explain why the SNB decided to keep its policy rate at -0.75%.Use the EUD and r equations to help with your explanation.
Why does the author say that “the central bank is still in crisis mode?” (Hint: look at the reported indicators describing current Swiss macro performance.)
How has the low policy rate affected the Swiss housing market? Is this a potential problem?
Does this article suggest a potential conflict between internal balance (IB) and external balance (EB) in Switzerland?

answer preview

Swiss National Bank (SNB) decided to keep its policy rate at -0.75% because it had a lackluster economic growth since the Financial Crisis in late 2008 which resulted in the lowering of the inflation rates until they are now hovering around zero as illustrated by the graph below.

Lately the exports made by Switzerland to the Eurozone haven’t fared well and the Swiss economy which is dependent on those exports has also had problems of its own. There has been weak contribution of exports according to the trend in exports as well as the trade data available. When there is a financial crisis, money flows in. The ruble crisis inserts upwards pressure on the number of euros one requires to purchase a Swiss franc since many investors are striving hard to purchase the francs……………………….words 889