The Swiss franc Euro exchange rate is currently an interesting exchange rate with headlines
such as “
Switzerland abandons floating exchange rate in dramatic
'currency war' twist”
. TheSwiss National Bank (SNB) operated a floating currency exchange policy until in September2011 it deem it appropriate to drop that policy in substitute for a fixed exchange rate so as theSwiss franc did not drop below 1.20 CHF/Euro.
THE REAL INTEREST RATE DIFFERENTIAL MODEL OF EXCHANGERATE DETERMINATION
With the movement of capital becoming ever more uncomplicated in recent decades due tothe development of technology and lifting of international barriers interest rate differentialshave become more important determinant of exchange rates. Well known models and studiesunderscore the role of interest rates in determining real exchange rates. These include the
C H F p e r E u r o