Stefan Grack, former vice president of the Central Bank of Ireland, Ivan Longville, a professor at the University of Basel, and Charles Viplos, honorary professor of the Senior Institute of International Relations and Development in Geneva, said: “We believe that the identification of exchange rate manipulators [of the United States Treasury Department] is misleading and based on inconsistency.
The principle of reason.
Three economists said that the U.S. Treasury Department stipulates that a country will be considered a “exchange rate manipulator” if it meets the following three conditions within 12 months: the country’s trade surplus with the United States is at least $20 billion; the country’s current account surplus accounts for at least 2% of its gross domestic product (GDP); and the country’s at least Six months of foreign exchange purchase and net purchase exceed 2% of its GDP.
They made it clear that these three criteria were “unreasonable”.
Regarding the trade imbalance, they said that the trade surplus between Switzerland and the United States is only an exception. The Swiss economy has its own speciality, with different trade differences with different countries.” The trade surplus or deficit has nothing to do with exchange rate manipulation.
Regarding the current account surplus, they believe that the Swiss current account surplus is due to the huge amount of foreign investment in Switzerland, while the strong Swiss investment capacity is due to the increase in savings caused by the aging population in Switzerland, and the government’s debt ratio has been low before the coronavirus outbreak and the ability to invest.” This also has nothing to do with exchange rate manipulation.”
Regarding national intervention in the foreign exchange market, they pointed out that the Swiss franc is an important safe haven currency in the world. During the epidemic, global capital flowed into Switzerland to avoid risk, resulting in the appreciation of the Swiss franc and the decline in the competitiveness of Swiss exports.
Since Swiss interest rates are negative, the “only solution” to avoid the appreciation of the Swiss franc is to buy foreign exchange.
They stressed that the real effective exchange rate is more useful for measuring the real value of the currency than the bilateral nominal exchange rate, and based on the actual effective exchange rate of the Swiss franc, the current control of the Swiss central bank on the foreign exchange market is not enough to depreciate the Swiss franc to bring a price advantage to Swiss international trade.
They also pointed out that the IMF’s reports in recent years did not believe that Switzerland manipulated the exchange rate, but all of them thought that the Swiss franc was too valuable, which highlighted the unreasonableness of the United States’ approach.
After the United States identified Switzerland as a “currency manipulator”, the Swiss Central Bank announced in the middle of this month that it would continue to implement expansionary monetary policy to ensure economic and price stability in the context of the impact of the epidemic on the economy.