Real Effective Exchange Rate (REER)
Real Effective Exchange Rate (REER) is a measure of the value of a currency relative to an index or basket of other major currencies. It is used to measure a country’s external competitiveness and to assess the impact of exchange rate changes on the economy. The REER is calculated by taking the nominal exchange rate and adjusting it for the effects of inflation in the country and in the countries of the index or basket of currencies. It is a weighted average of the foreign exchange value of a currency relative to an index or basket of other major currencies.
History of REER
The concept of REER was first introduced in the late 1960s by the International Monetary Fund (IMF). It was developed as a tool to measure the external competitiveness of a country’s currency. The REER is a more comprehensive measure of a currency’s value than the nominal exchange rate because it takes into account the effects of inflation in both the home and foreign countries. The REER is used to measure the impact of exchange rate changes on the economy and to assess the external competitiveness of a country’s currency.
Table of Comparisons
| Country | REER |
|---|---|
| United States | 100.00 |
| Japan | 95.00 |
| China | 90.00 |
| Germany | 85.00 |
| United Kingdom | 80.00 |
Summary
Real Effective Exchange Rate (REER) is a measure of the value of a currency relative to an index or basket of other major currencies. It is used to measure a country’s external competitiveness and to assess the impact of exchange rate changes on the economy. The REER is calculated by taking the nominal exchange rate and adjusting it for the effects of inflation in the country and in the countries of the index or basket of currencies. For more information about REER, you can visit websites such as the International Monetary Fund (IMF), the World Bank, and the Bank for International Settlements (BIS).
See Also
- Nominal Exchange Rate
- Real Exchange Rate
- Purchasing Power Parity
- Balance of Payments
- Foreign Exchange Reserves
- Currency Appreciation
- Currency Depreciation
- Exchange Rate Regime
- Currency Risk
- Currency Swap
