In 2002, when Germany, France, Italy and Austria adopted the Euro currency, the exchange rate was 1.60 CHF (Swiss Franc) = 1€ (Euro). The prices and salaries in Switzerland were slightly higher than in it's neighbours, but reasonably so.

Since then the Swiss franc has been more and more valuable and today reaches the rate of 1.04 CHF = 1€. The prices and salaries in Switzerland are over two times bigger than in the neigouring countries.

Depending on the way of computing this (price of food, price of housing, prices of insurances, lower range salaries or median salaries), the actual exchange rate should be between 1.80 CHF and 2.50 CHF for 1€.

Since the exchange rate is so much biased, in a free market it should make it easy for Swiss people to buy stuff in neighbouring countries for cheap, and re-sell it at a more competitive price in Switzerland. Thus having the effect to lower prices, creating deflation, and equilibrate the prices with the neighbouring countries.

So my question is : Why doesn't such a regulation of the exchange rate happen? What actually happens is the opposite : The price bias becomes wider and wider, leading to a ridiculous situation where for example a piece of bread costs over 2 times more in one side of the border than on the other side, with all the side issues this causes.

In 2002, when Germany, France, Italy and Austria adopted the Euro currency, the exchange rate with Switzerland was 1.60 CHF (Swiss Franc) = 1€ (Euro). The prices and salaries in Switzerland were slightly higher than in its neighbours, but reasonably so.

Since then the Swiss franc has been more and more valuable and today reaches the rate of 1.04 CHF = 1€. The prices and salaries in Switzerland are over two times higher than in the neighbouring countries.

Depending on the way of computing this (price of food, price of housing, prices of insurances, lower range salaries or median salaries), the purchasing power parity exchange rate should be between 1.80 CHF and 2.50 CHF for 1€.

Since the exchange rate is so biased, in a free market it should be easy for Swiss people to buy stuff in neighbouring countries for cheap prices, and re-sell them at a more competitive prices in Switzerland. That would have the effect of lowering prices, creating deflation, and equalizing prices with neighbouring countries.

So my question is : Why doesn't such a regulation of the exchange rate happen? What actually happens is the opposite : The price bias becomes wider and wider, leading to a ridiculous situation where for example a piece of bread costs over 2 times more in one side of the border than on the other side, with all the side issues this causes.

First, I am a complete noob about economy, so please don't blame me.

In 2002, when Germany, France, Italy and Austria adopted the Euro currency, the exchange rate was 1.60 CHF (Swiss Franc) = 1€ (Euro). The prices and salaries in Switzerland were slightly higher than in it's neighbours, but reasonably so.

Since then the Swiss franc has been more and more valuable and today reaches the rate of 1.04 CHF = 1€. The prices and salaries in Switzerland are over two times bigger than in the neigouring countries.

Depending on the way of computing this (price of food, price of housing, prices of insurances, lower range salaries or median salaries), the actual exchange rate should be between 1.80 CHF and 2.50 CHF for 1€.

Since the exchange rate is so much biased, in a free market it should make it easy for Swiss people to buy stuff in neighbouring countries for cheap, and re-sell it at a more competitive price in Switzerland. Thus having the effect to lower prices, creating deflation, and equilibrate the prices with the neighbouring countries.

So my question is : Why doesn't such a regulation of the exchange rate happen? What actually happens is the opposite : The price bias becomes wider and wider, leading to a ridiculous situation where for example a piece of bread costs over 2 times more in one side of the border than on the other side, with all the side issues this causes.

In 2002, when Germany, France, Italy and Austria adopted the Euro currency, the exchange rate was 1.60 CHF (Swiss Franc) = 1€ (Euro). The prices and salaries in Switzerland were slightly higher than in it's neighbours, but reasonably so.

Since then the Swiss franc has been more and more valuable and today reaches the rate of 1.04 CHF = 1€. The prices and salaries in Switzerland are over two times bigger than in the neigouring countries.

Depending on the way of computing this (price of food, price of housing, prices of insurances, lower range salaries or median salaries), the actual exchange rate should be between 1.80 CHF and 2.50 CHF for 1€.

Since the exchange rate is so much biased, in a free market it should make it easy for Swiss people to buy stuff in neighbouring countries for cheap, and re-sell it at a more competitive price in Switzerland. Thus having the effect to lower prices, creating deflation, and equilibrate the prices with the neighbouring countries.

So my question is : Why doesn't such a regulation of the exchange rate happen? What actually happens is the opposite : The price bias becomes wider and wider, leading to a ridiculous situation where for example a piece of bread costs over 2 times more in one side of the border than on the other side, with all the side issues this causes.