Effective exchange rate methodology in the NBS

Transcription

1 Effecve exchange rae mehodology n he NBS Inroducon Nomnal effecve exchange rae (NEER) s a weghed average of blaeral exchange raes of a counry o s relevan radng parners. Real effecve exchange rae (REER) s represened by a weghed average of relave prces (measured n CPI (consumer prces), PPI (ndusral producers prces), PPI-manufacurng (manufacurng prces) or ULC (un labour coss) as an example) n domesc economy and radng parners economes denomnaed n sngle currency. In he NBS he effecve exchange rae serves as an ndcaor of domesc producers compeveness developmen n relaon o s mos sgnfcan radng parners. In order o oban an objecve and up-o-dae vew on hs developmen, he effecve exchange has o reflec he changes n foregn rade erroral srucure resulng from he gradual ransformaon of slovak economy, s EU and EMU membershp, and from he globalsaon process. The am of hs paper s o descrbe he mehodology used for he nomnal and real effecve exchange rae complaon n he NBS. The followng conen of he paper consss of he descrpon of Slovaka s relevan radng parners selecon process and her weghs compuaon n chaper, reference o he sources and mehods used n he npu daabase creaon n chaper 2, and fnally explanaon of he NEER and REER ndces compuaon n chaper 3.. Tradng parners selecon and her correspondng weghs The frs sep n effecve exchange rae complaon s he selecon of relevan radng parners. A ceran balance beween he suffcen coverage of foregn rade and effcency has o be found. The evaluaon of Slovaka s ndvdual radng parners sgnfcance s based on he annual daa coverng slovak foregn rade erroral srucure n from he OECD daabase. Foregn rade urnover wh Slovaka n ndvdual years was calculaed for each counry. Only expors and mpors n secons 5-8 SITC (Sandard Inernaonal Trade Classfcaon) were aken no accoun: Chemcals and relaed producs, Manufacured goods, Machnery and ranspor equpmen, Mscellaneous manufacured arcles. The properes of hese goods dffer dependng on he counry of orgn, herefore her prces are dfferen and can be compared usng he effecve exchange rae. Goods belongng o secons 0-4 and 9 (Food and lve anmals, Beverages and obacco, Crude maerals, Mnerals fuels, Ols and fas, Ohers) were excluded, because her prces are approxmaely equal on he world marke whou any dependence on he counry of orgn and herefore do no reflec he developmen of prce compeveness of ndvdual counres. Each seleced counry had o fulfl he condon o acheve a leas 2 % average share on slovak foregn rade urnover n Followng counres sored by sgnfcance Errors, ha occurred n he OECD daabase n 2004 n he form of hgher sum of expors or mpors over all counres han he oal expor or mpor of Slovaka, were caused by double values n he case of USA, France and Norway n comparson o he Sascal offce of he Slovak Republc daa. Therefore hese values were subsued wh he daa from he Sascal offce of he Slovak Republc.

2 have fulflled hs condon: Germany, Czech Republc, Ialy, France, Ausra, Poland, Hungary, Uned Kngdom, Uned Saes, Neherlands, Belgum, Span, Russan Federaon and Chna. Korea was added o he selecon due o he srong growh of s foregn rade wh Slovaka n Afer he selecon he shares of above menoned radng parners were normalsed n order o sum up o. Weghs of he 5 seleced counres w, ha are necessary for he effecve exchange rae compuaon, were obaned n he process. w = 5 ( X + M ) = + M w wegh of radng parner X expor of goods belongng o secons 5 8 SITC from Slovaka o counry M mpor of goods belongng o secons 5 8 SITC from counry o Slovaka X 2. Exchange raes and prce ndcaors daa sources Blaeral exchange raes of domesc currency o he currences of relevan radng parners and prce ndcaors for ndvdual counres (CPI, PPI, PPI-manufacurng and ULC) represen he npu daa n he NEER and REER complaon. There s an nenon o use daa from a sngle source (blaeral exchange raes from he NBS or from ECB afer Slovaka became EMU member and prce ndces from he OECD daabase) ha should ensure beer comparably of ndvdual ndcaor caegores beween seleced counres. In order o consruc he effecve exchange raes for he whole hsory of Slovaka exsence was necessary o complee he daabase from addonal sources and o approxmae mssng daa. The blaeral exchange raes of domesc currency o he currences of relevan radng parners are needed for he compuaon of boh he nomnal and real effecve exchange rae. The NBS s he source of he majory of blaeral exchange raes daa. In he case, when he exchange rae of a counry (Czech Republc, Poland, Hungary, Russan Federaon, Chna and Korea) was no publshed by he NBS n he pas, was calculaed as a cross rae from he SKK/USD exchange rae and he exchange rae of he parcular counry o USD obaned from he OECD daabase. In he case, when a counry enered he EMU, he exchange rae o s currency s furher calculaed as a cross rae from he SKK/EUR exchange rae and s converson rae. Smlarly, afer Slovaka became EMU member s exchange rae o he currences of counres ousde euro zone s calculaed as a cross rae from he slovak crown converson rae and of he parcular counry currency exchange rae o euro. The NBS publshed he exchange raes n he form of prce quoaon (he prce of a foregn currency un n erms of he domesc currency). The sandard n effecve exchange raes complaon s ha an ncrease represens apprecaon. Therefore all he blaeral exchange raes were convered o value quoaon (he value of he domesc currency un n erms of a foregn currency). Monhly daa on exchange raes were aggregaed usng geomerc average ndependen on he quoaon form n order o compue effecve exchange rae on quarerly bass 2. 2 Brodsky, D. (982), Arhmec versus Geomerc Effecve Exchange Raes, n: Welwrschaflches Archv, 8, pp

3 Several prce ndcaors are used n he effecve exchange rae compuaon dsngushng by her avalably and comparably beween ndvdual counres, bu also by her ably o capure he changes n domesc producers compeveness. Consumer prce ndex (CPI) was obaned from he OECD daabase (em Consumer prces - all ems) for all counres on monhly bass snce 993. The me seres for Chna was monh shorer, herefore was compleed usng he predcon from he se of deflaors provded by he ECB for he purpose of effecve exchange raes calculaon. Indusral producers prces ndex domesc (PPI) was obaned from he OECD daabase for mos counres (em Domesc producer prces - Indusral Acves) on monhly bass snce 993. Mssng daa for Ausra, Poland ( ), Hungary, Russan Federaon ( ) and Slovaka (993) and he complee me seres for he Uned Saes were obaned from he IFS daabase of he IMF (em PPI / WPI or PPI % CHG. OVER PREVIOUS PERIOD n he case of Russan Federaon). The me seres from he daabase SDW of he ECB (em Producer Prce Index, domesc sales, Toal Indusry (excludng consrucon)) was used n he case of France ( ). In he case of Chna he daa from he OECD daabase (em Toal producer prces - Indusral Acves) for he perod of are avalable only on annual bass. Therefore was necessary o nerpolae 3 hose daa o monhly frequency. The resulng ndex was exended snce 2000 usng annual changes avalable n he IFS daabase of he IMF (em PPI / WPI % CHANGE) on monhly bass. Shorer me seres for Ausra (by monh) and Chna (by 5 monhs) were compleed usng he predcon from he se of deflaors provded by he ECB for he purpose of effecve exchange raes calculaon. Manufacurng producers prces ndex domesc (PPI-manufacurng) was also obaned from he OECD daabase for mos counres (em Domesc producer prces Manufacurng) on monhly bass snce 993. Mssng daa for Poland ( ), Hungary and Russan Federaon ( ) were approxmaed usng he PPI dynamcs obaned from he IFS daabase of he IMF (em PPI / WPI or PPI % CHG. OVER PREVIOUS PERIOD n he case of Russan Federaon). Daa for Poland ( ) were approxmaed wh he dynamcs of manufacurng producers prces oal obaned from he OECD daabase (em Toal producer prces - Manufacurng). Daa for France ( ), Ausra ( ) and Uned Kngdom ( ) were obaned from he SDW daabase of he ECB (em Producer Prce Index, domesc sales, MANUFACTURING). Mssng daa for Slovaka (993) were compleed usng he dynamcs obaned from he Slovsa daabase of he Sascal offce of he Slovak Republc (em Indusral producers prce ndces whou excse dues Inland, Manufacured producs). In he case of Chna he PPI-manufacurng daa n he OECD daabase are he same as he PPI daa. Therefore he PPI-manufacurng daa were approxmaed n he same way usng he PPI daa descrbed n he prevous paragraph. Shorer me seres for Ausra (by monh) was agan compleed usng he predcon from he se of deflaors provded by he ECB for he purpose of effecve exchange raes calculaon. 3 Average annual daa for were assgned o he 6-h monh of each year and he daa beween ha monh and he correspondng monh of he nex year were nerpolaed usng consan nflaon rae leadng o he PPI change o he requred level. Such mehod produces a smooher pah of he ndex han a mehod mananng he annual average wh lnear nerpolaon beween years. Followng applcaon of annual changes, ha are avalable on monhly bass snce 2000, would nroduce arfcal seasonaly o he ndex wh pecewse (yearwse) lnear pah. 3

4 Un labour coss (ULC) were obaned from he se of deflaors provded by he ECB for he purpose of effecve exchange raes calculaon for all counres excep Russan Federaon. Mssng daa for he Czech Republc ( ) were compleed usng he forecas from he same source. Daa for Poland, Hungary and Slovaka ( ) were approxmaed usng he dynamcs obaned from he SDW daabase of he ECB (em Un labour cos n he manufacurng secor). Shorer me seres for Poland, Uned Kngdom, he Uned Saes, Korea (by quarer) and Chna (by 2 quarers) were exended usng he above menoned ECB forecas. ULC for Russan Federaon were calculaed as a rao of he compensaon of employees a curren prces and he seasonally adjused GDP a consan prces obaned from he OECD daabase (ems Compensaon of employees, oal and Gross domesc produc - oupu approach). The compensaon of employees was seasonally adjused usng he X2 mehod. Mssng daa ( ) were exrapolaed usng AR process and quadrac rend 4. Shorer me seres for Russan Federaon (by 2 quarers) was exended usng he approxmaon resulng from he geomerc average of s own dynamcs from he prevous perod and he geomerc average of he remanng 5 counres dynamcs from he curren perod. The reason for he ncluson of lagged ULC dynamcs for Russan Federaon no he gven approxmaon s s hgher volaly n comparson o he daa for he remanng counres. Manufacurng un labour coss (ULC-manufacurng) were also obaned from he se of deflaors provded by he ECB for he purpose of effecve exchange raes calculaon for all counres excep Russan Federaon. Mssng daa a he begnnng of he observed perod for he Czech Republc ( ) and Chna (993) were compleed usng he forecas from he same source. Daa for Poland, Hungary and Slovaka ( ) were approxmaed usng he dynamcs obaned from he SDW daabase of he ECB (em Un labour cos n he manufacurng secor). Shorer me seres for Poland, Uned Kngdom, he Uned Saes, Korea (by quarer) Hungary and Chna (by 5 quarers) were exended usng he above menoned ECB forecas. ULC-manufacurng daa for Russan Federaon were calculaed as a rao of he compensaon of employees n manufacurng a curren prces and he seasonally adjused GDP n manufacurng a consan prces obaned from he OECD daabase (ems Compensaon of employees, Manufacurng and Gross domesc produc - oupu approach, Manufacurng). The compensaon of employees n manufacurng was seasonally adjused usng he X2 mehod. Due o he mssng daa ( ) an approxmaon of ULC-manufacurng was requred based on he dynamcs of he ULC daa for he oal economy. Shorer me seres for Russan Federaon (by 2 quarers) was exended usng he average of s own lagged dynamcs and he ULC-manufacurng dynamcs for he remanng counres descrbed n he prevous paragraph. 3. Effecve exchange raes calculaon Chaned weghed geomerc averages of monhly (quarerly n he case of REER based on ULC) relave changes of blaeral nomnal exchange raes mulpled (n he compuaon of REER) by relave changes of he raos of prce ndces for he domesc economy o he correspondng ndcaors for he ndvdual radng parners are used o calculae he nomnal or real effecve exchange rae: 4 ULCT = *@TREND^ *ULCT() 4

5 REER = REER 5 = E P E P P P w REER - real effecve exchange rae n he curren perod REER - - real effecve exchange rae n he prevous perod E - blaeral nomnal exchange rae of domesc currency o he currency of counry n he curren perod n he form of value quoaon (he value of he domesc currency un n erms of a foregn currency) E - blaeral nomnal exchange rae of domesc currency o he currency of counry n he prevous perod P - domesc prce ndcaor (CPI, PPI, PPI-manufacurng, ULC, ULCmanufacurng) n he curren perod P - - domesc prce ndcaor n he prevous perod P - prce ndcaor of counry n he curren perod P - prce ndcaor of counry n he prevous perod w - wegh of counry n he curren perod The NEER dynamcs equals o he weghed geomerc average of he changes of blaeral nomnal exchange raes o he currences of seleced 5 counres. In he case of REER afer exenson wh he relave prces equals o he weghed geomerc average of he changes of 5 blaeral real exchange raes based on CPI, PPI, PPI-manufacurng, ULC or ULCmanufacurng. An ncrease of he resulng ndces represens effecve exchange rae apprecaon. Weghs are aken from he year correspondng o he parcular me pon, for whch he effecve exchange rae s calculaed. The weghs are consan unl 997, because no earler daa on erroral and SITC srucure of slovak foregn rade are avalable. Weghs resulng from recenly publshed prelmnary daa on slovak foregn rade srucure are used n he las 2 years. Therefore he effecve exchange raes for he las 2 years need o be revsed regularly afer he laes daa publcaon. The resulng effecve exchange rae ndces are avalable snce 993 a he cos of ceran approxmaons menoned n he secon dealng wh he npu daa sources. Those approxmaons are relaed mosly o he counres wh relavely lower weghs, herefore hey should no have sgnfcan mpac on he drecon of effecve exchange raes developmen. As he majory of approxmaons were necessary n he begnnng of observed perod, hey do no nfluence he curren NEER and REER dynamcs. Conac person: E-mal: Mlan Gylank Narodna banka Slovenska Imrcha Karvasa Braslava Slovaka mlan_gylank@nbs.sk Furher nformaon on effecve exchange rae compled n he NBS n Slovak: hp:// 5