Table H11a Effective exchange rate indices
The index of the nominal effective exchange rate of the kuna is a weighted geometric average of the index of bilateral nominal exchange rates of the kuna against the selected currencies of the main trading partners. The currencies of the main trading partners and their weights are determined based on the structure of imports and exports of manufactured goods, where the weights used reflect direct import competition, direct export competition and export competition in third markets (see Box 2 in CNB Bulletin No. 165, 2011). The group of countries included in the formation of the index of the effective exchange rates of the kuna comprises the following 22 partner countries: nine euro area countries (Austria, Belgium, France, Germany, Italy, the Netherlands, the Slovak Republic, Slovenia and Spain), four EU countries outside the euro area (the Czech Republic, Hungary, Poland and Sweden) and nine non–EU countries (Bosnia and Herzegovina, Japan, China, Russia, the United States, Serbia, Switzerland, Turkey and the United Kingdom). The weights assigned to specific countries in the calculation of the effective exchange rates of the kuna are time varying weights, calculated to reflect the average structure of RC’s foreign trade over three consecutive years (for more details see Box 3 in CNB Bulletin No. 205, 2014), up until the period from 2016 to 2018, which is currently used in the calculation of indices for the subsequent years. In the calculation of the effective exchange rates of the kuna, the fixed chain–linking methodology on a three–yearly basis is used. The time series for base indices are calculated based on 2010. The increase in the index of the nominal effective exchange rate of the kuna in a certain period indicates that the kuna has depreciated against the basket of currencies and vice versa.
The index of the real effective exchange rate is a weighted geometric average of the index of bilateral exchange rates of the kuna adjusted for the corresponding indices of relative prices or costs (the ratio of price indices or costs in partner countries to domestic prices). Industrial producer price indices on the total market, consumer price indices (harmonised consumer price indices for EU member states) and unit labour cost indices in the total economy and manufacturing are used as deflators. The time series for the index of industrial producer prices on the total market (domestic and non–domestic) for Croatia is available from January 2010, while for the years before 2010, the time series for the index of industrial producer prices on the total market equals the index for producer prices on the domestic market. The time series for consumer prices in Croatia is constructed in the following manner: retail price indices are used for the period until and including December 1997 and consumer price indices for the period as of January 1998. As data on unit labour costs are not available for all the countries, the basket of countries for the calculation of the real effective exchange rate of the kuna deflated by unit labour costs in the total economy and manufacturing was narrowed to 16, that is, 14 countries trading partners – all countries trading partners (22 of them) excluding Switzerland, Turkey, China, Russia, Bosnia and Herzegovina and Serbia, that is, excluding these six countries and Belgium and Japan. Unit labour costs in Croatia are calculated as the ratio of compensation per employee to labour productivity (expressed as GDP per employee) (for more details on the calculation of unit labour costs, see Box 1 in CNB Bulletin No. 141, 2008). Data on the real effective exchange rate for the last month are preliminary. The historical data may be corrected for the subsequent changes in the data on deflators used in the calculation of the index of the real effective exchange rate of the kuna.