The post Addendum to the real Swiss franc – Commerzbank appeared on BitcoinEthereumNews.com.

The real exchange rate of the Swiss franc (against Switzerland’s trading partners, REER) has fluctuated much less strongly in recent years than the nominal exchange rate (NEER). This is exactly what should be expected from economic theory, but unfortunately it is rarely observed, Commerzbank’s Head of FX and commodity research Ulrich Leuchtmann note. Real exchange rate of CHF fluctuates much less strongly “The relative stability of the REER shows that exchange rates even out differences in domestic price developments. If a domestic gain or loss in purchasing power leads to proportional gains or losses in the corresponding currency, the NEER will move, but the REER will remain unchanged. This is exactly what has happened to the Swiss franc over the last few years. This effect often gets lost in the general noise.” “Some observers take this as an opportunity to question the economic concept of (nominal and real) exchange rates as a whole. In such situations, economists are always on the defensive. However, economists cannot conduct experiments with entire economies. Sometimes, however, chance provides us with something that resembles an experiment. The inflation differential between Switzerland and the rest of the world has changed significantly in recent years.” “This is because Switzerland was almost the only country not affected by the global inflation shock. We can assume with a high degree of certainty that this effect was the dominant factor in the exchange rate development. Everything else was almost ‘constant’ in comparison. Just as the experimental scientist likes it. And because this experiment has impressively confirmed the economic idea, I am happy.” Source: https://www.fxstreet.com/news/addendum-to-the-real-swiss-franc-commerzbank-202408161210

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Filed under: News - @ August 16, 2024 1:21 pm