600000 300000 400000 500000 200000 700000 100000 2006-01 2006-06 2006-11 2007-04 2007-09 2008-02 2008-07 2008-12 Assets - Foreign Exchange Reserves 2009-05 Question 2 (Exchange Rate Choice and Exchange Rate Crises) 2009-10 2010-03 Swiss National Bank - Partial Balance Sheet Figure 1 - SNB Balance Sheet 2010-08 2011-01 2011-06 2011-11 2012-04 2012-09 2013-02 Assets - Total 2013-07 2013-12 2014-05 2014-10 2015-03 2015-082(a) Examine Figure 1. Explain what is happening with the balance sheet items starting in the Global Financial Crisis and continuing through the end of 2014. Provide an economic background and intuition. (3 points) 2(b) Using what you know of a simple central bank balance sheet, compute (roughly) the backing ratio for the SNB in September 2012. (2 points) 2(c) Use the second generation IS-LM-FX model to analyse the Swiss economy during the period of the exchange rate floor from September 2011 to December 2014. Show the effects graphically. State the effects on output, trade balance, nominal interest rates. (5 points) 2(d) Use the model to show why Swiss National Bank chosen to end the exchange rate floor at the end of 20147 More generally, can you think of any reasons that would have aided Switzerland (relative to an emerging market economy) in defending the peg successfully? (5 points)