06 January 2009

Exchange rate indices

As has been reported previously, the Central Bank of Iceland discontinued the practice of calculating and publishing the so-called Exchange Rate Index at year-end 2008. However, the Bank will continue to publish on its website four other exchange rate indices, as it has done for the past two years; cf. the Bank’s press release of November 30, 2006. It has been decided to change the basis for the calculation of one of these four indices by assigning it a January 2, 2009 value equivalent to that of the previous Exchange Rate Index thus ensuring continuity in the series of figures that is often cited in discussions of the exchange rate. The index chosen, called the narrow trade index or narrow trade basket, is that whose structure most closely resembles that of the newly discontinued Exchange Rate Index.

The narrow trade basket is calculated based on merchandise trade with all countries accounting for at least 1% of Iceland's merchandise trade over the past three years. It also takes into account the relative share of tourism in services trade. The distribution of tourism revenues is estimated from foreign travellers' nights of accommodation in hotels and guesthouses, by country of origin, while expenditures are based on a geographical breakdown of Icelanders' credit card use abroad.


January 6, 2009