Effective indicators of external developments

Since July 2006, the CNB forecast in the area of assumptions about external developments has been based on effective indicators for the euro area. The effective indicators for the euro area (the 11 member states excluding Luxembourg) describe external developments more comprehensively than the formerly used indicators of developments in the German economy. The fixed weights used to calculate the effective indicators are specified for the individual countries according to the average share of each country in foreign trade with the Czech Republic in 2005 (Germany 60.6%, Austria 10.1%, Italy 8.1%, France 7.3%, other countries less than 5%).

Effective indicators of GDP, consumer price inflation and producer price inflation are compiled for the needs of the forecast. Historical series for effective consumer price inflation and GDP are calculated on the basis of data from national statistical offices, while effective producer price inflation is based on Eurostat's harmonised data. Forecasts for all these indicators are derived from the Consensus Forecasts predictions.

The effective inflation indicator was slightly higher in the past than inflation in Germany

The effective GDP growth indicator was slightly higher in the past than GDP growth in Germany

As shown in Charts 1 and 2 (Box), the effective indicators follow a similar pattern as the formerly used indicators for Germany. Nevertheless, effective inflation and GDP growth are both slightly higher on average over the whole period than the data for Germany, but lower than the standard euro area indicators. The introduction of an aggregate involving multiple countries dampens the impacts of specific factors, such as the VAT rate change in Germany, on foreign inflation and external demand. The difference between the individual effective indicators and the standard euro area indicators is mainly due to different weights, although in the case of consumer price inflation it is also due to the specific index used (the CPIs, not HICPs, for each country are used to calculate consumer price inflation).


The equilibrium variables in the core prediction model have been adjusted in line with the differences observed between the effective indicators and the indicators for Germany in order to prevent any unfounded shift in view regarding past and future developments.