The Significance of Switzerland's Enormous Current-Account Surplus

Aussenwirtschaft, Swiss Institute for International Economics and Applied Economic Research (SIAW-HSG), University of St. Gallen, Issue 4/2008

23 Pages Posted: 19 Aug 2015

See all articles by Peter Jarrett

Peter Jarrett

OECD

Céline Grislain-Letrémy

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST); Université Paris Dauphine; Ministry of Health

Date Written: 2008

Abstract

Switzerland has had a long standing surplus on its current account. But over the past 15 years that surplus has surged to levels unmatched by nearly any other OECD country at any point. This paper looks at the surplus from a balance of payments vantage point as well as from the optic of the excess of national saving over domestic investment.It then seeks possible explanations for the uptrend and assesses whether it results to any extent from market, institutional or policy failures that could call for reforms. A number of important measurement issues are raised. But the key recommendation is that the authorities should prepare for a possible sharp increase in the value of the Swiss franc if and when investors engaged in the “carry trade” unwind their positions. To that end they should examine labor, capital and product markets with a view to ensuring they are as flexible as possible and that factors are as mobile as possible, both geographically and sectorally. This will allow any necessary adjustment to a higher exchange rate to be smoothly accommodated.

Keywords: Current account, Carry trade, Switzerland, Balance of payments

JEL Classification: E01, E21, E22, E44, E58, E65, F31, F32, O52

Suggested Citation

Jarrett, Peter and Grislain-Letrémy, Céline, The Significance of Switzerland's Enormous Current-Account Surplus (2008). Aussenwirtschaft, Swiss Institute for International Economics and Applied Economic Research (SIAW-HSG), University of St. Gallen, Issue 4/2008, Available at SSRN: https://ssrn.com/abstract=2646517

Peter Jarrett

OECD ( email )

2 rue Andre Pascal
Paris Cedex 16, MO
France

Céline Grislain-Letrémy (Contact Author)

National Institute of Statistics and Economic Studies (INSEE) - Center for Research in Economics and Statistics (CREST) ( email )

15 Boulevard Gabriel Peri
Malakoff Cedex, 1 92245
France

Université Paris Dauphine ( email )

Place du Maréchal de Lattre de Tassigny
Paris, Cedex 16, 75775
France

Ministry of Health ( email )

Ouagadougou
Mali

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
55
Abstract Views
655
Rank
667,636
PlumX Metrics