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84 Fed. Res. Bull. 811 (1998)
New Summary Measures of the Foreign Exchange Value of the Dollar

handle is hein.journals/fedred84 and id is 1603 raw text is: NewSui Measures tFg Exchange Value of h a l, bd~et- C. Lenv -f ''ahe- a,,d o'v, 'ri'.(n o[ lu' *o- tmtI I kFnance, I'epaled rir am U'e. Shre, ,5nplc,- gut' cud Adzu L Aqe ii-' oite c' nzxc'.'rh 4's 115.; ~:e ie wite at trad s ghtd idex ot iSe fo egn excana'ge vOJOC of 'h U.S d,,Jllatr &gam, nthe c~ren alas of thoe 4 the countr'es m a e (rotp of Teo (G- 0), de00o1ed te Federal Resere Boa I 1971, has plh.ye an 'opta t roc ui a -ayss o0 fo.raigo infl'enc;es a C US. YcO 'iem Vo more than0 ~i tVenCty-ive year? Howeaer a'ges - nr'atlo aJ trading relat'osnips .Cd .1 th snructure Cf ,e tional fioancia! carke have a terst in the ,Trreies ,. U.S, rding 1arirs 11NsV.e thQ G-i0 countries. Furhemore, ofb 1 C e European Econric and Moneary 11 - ( J, is bringing about signflieaa chaages insde tha (- J eountnes, withteer hihdllb itoaeav 1anua0y 1999,C'o'ae v repla riv' of 1 G-ii currencies. Consdara Io t developtencos has prompted talng a flesh lock a ways to oeasure the foreign exchnge xaue ()f the ar. at s a 'esut1 memoers of tile Board's staff have devefo1ed ,everal new indexes of the deflar's 0erall t wreag' exchange value. Mn generai, an index of the fo-a g eno age val. of a currency is intended to distill ol a single number key information o1m often divergent movc- meres in bilateral xchar.'gvr'awgv As w! a prce index, axa exca ge re indoe, can be created i n \arlet of ways The dsg to anC e-h-ine ate Ilndex-Fboil v whch aurren'cies ta and Ia cd a wegt them-depends5 1 ' onCC ts spciiopf)(os AIII.hogh 0h 'Yreess 's ompe'sig idd,Ua( aurrency 1?fo 1, 1 1 at'30 tOnh - Ion nube Incvi9-y: results in the !oss of sore a-nration a wall- of Ce saistica appendix31 Cs' Ih {,:,' Re~v 1d511i . Al ill'm Oldex of 114e W. gted-Aecag - sour go 5' alue so Ohe US. mOtlr Renisio . vot. 64 'Viui Si l)7Sl 700: Peter 0mp os d ec Ntahirs1 vo.'105' 0-cal'e ia 1k '1. 78:,--89'a -d B. ian l ( c 1087 ,' ~i. 41 -22. de i 11'Id i xi' ..... .. '1 311~ 10 on -vv preserve hnaii hat is criti- Exchangfe ,3 2 uees cam have vaious uses. They 21 4; .... .- 1 de anaysis5of the pica copeti- t101n2s (f do; gto :s leav uC foreign goods, We ete' f 1g ecnoi ad finalat develop - 01'' ls o a do1est cic p0e level and the demand 1o-' ci me' it a d Ieign are enca isse.s. The G-10 - wl-k.11<1 ch avelaped whe te ~ aBretton Woods s's252 It'l ti'ed en-ncat g' saes5 firs .roke down, was dilgned to 'srve 1s ' Y unar measure of 'de dot ,,. -, s a the currencies of ten c1''CI'g 's ,.ono participated in tNC , I' b151n1! 1, >co Il Daec ber 1971. Over a yeas, bee used tor a variety of p~ rpse, it -t as fun'ioned mainly as a tool in the anal /sis of how chages in the foreign exchange NItl of the dollar iW1Vaeace U.S. international trade. in this 'dex_ t bi ral dollar exchange rates are aggreg 10 usqg -1 alheral trade shares, which are viewed as rel'ecin c Ale relative importance of each Onu0r0 a, a compet f, world maIk s, Like the G-1d index. the new in'idexes are designed principally to measure competitiveness in world mar- kets. However the new indexes are created with a different weighting scheme that tocuses more direetly on the ecimpettiveness of U.S. goods i1 U S. and t,'agmn0 a'ket im-at.io, 130 new indexes sum- ma nz and c-a'aetrz th 's movements in 3'reign exctange nien-,e,_ iga Ia broade set of c~rrcie r'id - ar dsige1 tc rAe account of the -1ng2n1 5 11t0 Of irade '14f'fl ' and exchtge leN 1w (i . s f edoars overall foreigC xciaang vy'e hae te developed three cur- 'CeIcv gI 'u'.I a1 0 t' group ial and real 210c.adCl 4's .d 52'xe 30.1 iic OXread. I he '-Ir. and prll '4y grotup is tat of tho cur-recs of' inpor- 1 t U.S. atding p Ae1.'s This gIo u is the basis for C.. W tOe & ter's the broad 4de' L2 -00 31as foreim xchage ,alue. The

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