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This paper begins by providing a brief overview of the history of international monetary systems, in order to better understand the various exchange rate regimes used worldwide. In addition to reviewing the existing literature on the exchange rate arrangements with the purpose of recognizing why nations choose to enter or exit pegs, this paper also discusses which factors are relevant in regards to this decision. Furthermore, this study focuses on the exit problem, which describes, in whole, the issues that governments face during the transition from fixed to floating exchange rates. In this regard, it precisely explains the recommended steps nations should take in order for exiting their peg as smoothly as possible. It then considers a research conducted by Eichengreen and Rose (2010) on the economic and financial consequences of exits that led to the appreciation of the domestic currency. Moreover, this thesis details the reasoning behind the implementation as well as the discontinuation of the Swiss peg. Finally, based on the reviewed literature and research, this paper makes inferences about the likely outcomes of the EUR/CHF peg exit on the Swiss economy.
About the author
Ahmad Khoshi, studied at the University of Lausanne, HEC Lausanne - School of Business; Master in Science (MSc), Financial Engineering and Risk Management.
