Nevertheless, on a number of occasions over the past 18 months or so the Bank pointed to the high level of the exchange rate, noting that it had not declined in response to changes in these fundamental determinants.12 This concern can also be explained by considering changes in the exchange rate in the context of how the economy more broadly has evolved over this period.
9  The model also incorporates short-run variables that are intended to capture near-term financial market influences on the behaviour of the real TWI. These include the change in the CRB commodity price index, the change in the real S&P 500 total return index and the change in the VIX index of expected US equity price volatility.