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Running head: ACCOUNTING FINANCE
1
Accounting Finance
Student Name:
Institutional Affiliation:
Date:
ACCOUNTING FINANCE
2
Question 1
There are various reasons as to why the SNB (Swiss National Bank) decided to stop
holding the Swiss Franc within a capped exchange rate with the regional Euro. One of such
reasons is that the SNB realized that it needed large quantities of reserves in order to continue
maintaining the pegged exchange rate, which meant that the SNB had to constantly purchase or
sell the domestic currency. Besides, the setting of the Euro within a fixed exchange rate against
the Swiss Franc had compelled the SNB to print large quantities of francs, which at the long run
can result to the emergence of hyperinflation within the country. In addition, it is likely that SNB
discovered the capping of Euro resulted to undesired economic side effects, which is actually in
other terms, a higher inflation. This is on the basis of the fact that the more currency reserves
within a country, the monetary supply...