Real Effective Exchange Rate (REER) – UPSC Prelims

What is real effective exchange rate (REER)?
  • It is the weighted average of a country’s currency in relation to an index or basket of other major currencies.
  • The weights are determined by comparing the relative trade balance of a country’s currency against that of each country in the index.
  • An increase in a nation’s REER is an indication that its exports are becoming more expensive and its imports are becoming cheaper. It is losing its trade competitiveness.

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