Real Effective Exchange Rate
The Real Effective Exchange Rate (REER) is a trade-weighted index that adjusts a country's nominal exchange rate for relative inflation to compare the price competitiveness of domestic goods and services with those of its major trading partners. It aggregates real bilateral rates across partners, weighted by trade shares, into a single gauge of external competitiveness.
Example: If a country’s REER increases relative to its base year, it indicates that its price level, relative to its trading partners, has risen after adjusting for inflation, which can reflect reduced relative competitiveness.
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