Table 2: Variance decomposition of the five model changes Percentage of the change in variance Change 1  Change 2  Change 3  Change 4  Change 5  Total  Output gap  28  0  17  10  45  100  Nominal interest rate  54  0  -15  15  46  100  Real exchange rate  51  3  6  31  9  100  Description of model changes: Change 1: A lower exchange rate elasticity of non-commodity export demand Change 2: A higher share of imported inputs in the production of non-commodity exports Change 3: A higher share of imported inputs in the production of domestic consumer goods Change 4: A lower elasticity of substitution between domestic inputs and imported inputs in the production of non-commodity exports Change 5: A higher share of credit-constrained consumers  17  As expected, the reduction in the exchange rate elasticity of export demand plays an important role in generating higher variances in interest rates, exchange rates and the output gap.
In fact, these rules are well suited to the lion’s share of increasingly complicated banking business – but the reality is that not all banks and savings banks have as complex a set-up as is assumed under the new framework.