Exports, Sports Cars, and the Benefits of the Euro Crisis

Many export-orientated businesses in Switzerland complain about the strong Swiss franc, as it makes their products more expensive for foreign customers. Some even would like to see the Swiss central bank intervene in the foreign exchange markets to stabilize the Euro. On the other hand, a strong domestic currency also has its (short-term) advantages, as foreign products get (relatively) cheaper.

Since a recent post highlights that academics run the risk of “over-intellectualising”, let me use a hedonistic example: Ferrari’s F430 has a 4.3 liter V8 engine that punches out 375 kW (about 490 hp), thereby producing the kind of forward thrust that many would like to enjoy. Far less enjoyable, at least for younger academics, is its basic list price: €169,600 or about CHF 263,000 when the car was introduced in 2004.

Figure 1: Ferrari F430

Figure 2 illustrates the benefits of a weakening Euro. It shows how the F430′s basic price of €169,000 evolved since its introduction in 2004 if we convert it into Swiss francs. The price remains relatively stable until the end of 2006. Beginning in early 2007, the F430 gets more expensive (up to CHF 281,000). The gray line in Figure 2 shows the average price of an F430 in the 2004 to 2008 period, which is CHF 266,000. Since autumn 2008, the F430 gets cheaper and cheaper. If you were to buy an F430 today, you would “merely” have to spend some CHF 205,000, which is CHF 63’000 or 22% less than its 2004 to 2008 average price.

Figure 2: Ferrari F430 Foreign Base Price

Given that the Euro countries will likely continue to bail out Greece and potentially also other countries, you might think about whether now is the time to make a dream come true. Please let me know if this information triggers a purchase decision.

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This entry was posted in European Union, Sports by Michael M. Bechtel. Bookmark the permalink.

About Michael M. Bechtel

Michael Bechtel is an SNSF Research Professor at the University of St. Gallen's Department of Political Science. His research focuses on the politics of global environmental and economic risks. Current projects examine mass support for climate cooperation, the politics of natural disasters, and individual preferences for financial bailouts. Bechtel's research has been published in journals like American Journal of Political Science, Journal of Politics, and other noted academic outlets. He is the author and co-author of two books on the politics of financial markets. Visit www.mbechtel.com for more information.

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