Furthermore, developments in the domestic economy at the end of last decade were such that the stable exchange rate policy was gradually undermined. During the second half of the 1990´s, the Icelandic economy entered a period of high economic growth. Growth was initially well balanced and led by exports and increased investment in the private sector. But as it unfolded it became increasingly driven by consumption and investment in the non-traded goods sector, fuelled by a foreign financed credit expansion in the wake of intensified competition among lending institutions and a significant increase in credit availability. By 1998, signs of overheating were already increasingly visible in rising inflation and the ballooning current account deficit which climaxed in 2000 at 10 per cent of GDP. The Central Bank responded to the imbalances in the economy by tightening monetary policy. Through the effects of the tighter monetary policy, the exchange rate of the króna gradually appreciated as can be seen from Chart 1. In the spring of the year 2000 expectations in the market shifted for a variety of reasons; but concerns about the current account deficit and lower expectations of future economic growth were the most important. Subsequently the króna began to depreciate and continued to do so more or less uninterrupted, but on the whole in an orderly fashion, over a period of a year and a half until the end of November 2001. By that time, it had fallen from its peak by about a third against other currencies.
5 [6]  References Diewert, W.E and Fox, K.J. (2020), “Measuring real consumption and CPI bias under lockdown conditions”, NBER working paper series, No. 27144. Statistics Sweden (2020), press release (2020), ”Svårare beräkna inflation under coronapandemin”, (More difficult to calculate inflation during the corona pandemic) www,scb,se Statistics Sweden (2020), report to Consumer Price Index Board, ”Hantering av effekter av Corona-pandemin i KPI och HIKP”, (Managing the effects of the corona pandemic on the CPI and HICP) www,scb,se  Appendix Table 1. Products affected by lack of consumption Weight in CPI (per cent) Air package tours  1.2. Foreign air travel  0.6. Tickets to sporting events  0.4. Cinema tickets  0.2  Theatre tickets and entertainment  0.2  Entry tickets to entertainment  0.3  Total weight in CPI  2.9  Source: Statistics Sweden  6 [6]