Macroeconomics: theory and applications
Using an appropriate version of the IS/LM/BP model, demonstrate which of the curves in the model would shift in response to the fall in the world interest rates (iw). Also, show how this would affect Switzerland’s BP position: you must clearly explain if it is a BP surplus or a BP deficit. (15 Marks)
Briefly explain the main economic rationale behind the Swiss National Bank’s (SNB) decision to intervene in the foreign exchange market in response to such a strong demand for franc. (15 Marks)
The IS/LM/FE model predicts that the BP disequilibrium (i.e. BP≠0) in Question 1 should eventually disappear and BP must return to zero (BP=0). Explain the underlying transmission mechanism that ensures this adjustment when:
SNB decides to peg the national currency as explained in the introduction, and
SNB decides not to intervene, i.e. it allows the value of franc to be determined by market forces.
In addition to the two scenarios in Question 3, what other policy options are available for the Swiss authorities if they want to achieve BP=0? Discuss the pros and cons of each approach.
Explain why SBN abandoned its policy in 2015 and why the franc/Euro exchange rate fell so sharply as a result.
Some economists argue SNB’s intervention in the exchange market was successful while others disagree about the success of the intervention policy. Critically discuss both sides of the arguments.
Briefly explain the main economic rationale behind the Swiss National Bank’s (SNB) decision to intervene in the foreign exchange market in response to such a strong demand for franc.
Delivering a high-quality product at a reasonable price is not enough anymore.
That’s why we have developed 5 beneficial guarantees that will make your experience with our service enjoyable, easy, and safe.
You have to be 100% sure of the quality of your product to give a money-back guarantee. This describes us perfectly. Make sure that this guarantee is totally transparent.Read more
Each paper is composed from scratch, according to your instructions. It is then checked by our plagiarism-detection software. There is no gap where plagiarism could squeeze in.Read more
Thanks to our free revisions, there is no way for you to be unsatisfied. We will work on your paper until you are completely happy with the result.Read more
Your email is safe, as we store it according to international data protection rules. Your bank details are secure, as we use only reliable payment systems.Read more
By sending us your money, you buy the service we provide. Check out our terms and conditions if you prefer business talks to be laid out in official language.Read more