2 October 1998
Reserve Bank proposes TWI revisions
The Reserve Bank has undertaken a review of the Trade Weighted Index (TWI) it uses for summarising the effective value of the New Zealand dollar. As a result of this review, it proposes, commencing January 1 1999, to:
(a) Substitute the euro for the Deutsche mark in the TWI basket, but otherwise leave the currencies that comprise the basket unchanged. That is, the currencies will be the US dollar, yen, euro, Australian dollar and pound sterling.
(b) Adopt a new currency-weighting methodology which takes account of:
- New Zealand's import and export merchandise trade with each TWI country (as at present); and
- the GDP of each country as a share of the aggregate GDP of the five TWI countries.
The 11 countries that initially will participate in EMU will be regarded as a single country.
A 50:50 weighting will be given to these trade and GDP weights.
The reasoning behind this change is elaborated on in an Information Release, which is available from the Monetary Policy Implementation section, phone (04) 472 0074, or from the Reserve Bank's website (www.rbnz.govt.nz). The Reserve Bank will finalise the approach to be adopted effective 1 January 1999 by end-October 1998. Before formalising the TWI change, the Reserve Bank wishes to provide an opportunity for those interested to comment. Any comments should be registered before October 16 by faxing the Reserve Bank on (04) 473 1209.
For further information contact:
Anthea Black
Communications Officer
Phone: 04 471 3767
Email blacka@rbnz.govt.nz
