Indices of exchange rate effects in the international investment position
The indices of i.i.p.-weighted exchange rate effects (IIE) are based on the currency composition of the international investment position. They show the impact of exchange rate changes on the assets and liabilities side of the international investment position as a whole as well as on individual categories of assets and sectors.
The IIE allow exchange rate-related wealth effects, which the i.i.p. would only show with a lag of three months, to be approximated in a timely manner based on current exchange rates. Sensitivity analyses can be used to identify individual sectors which would, in certain scenarios, be majorly affected by (assumed) changes in the prices of individual currencies. In addition, methods for analysing time series can be applied to the indices, for example to measure the exchange rate-related volatility of the market value of individual asset holdings.