Bilateral Vs. Effective Exchange Rate
Bilateral exchange rate involves a currency pair, while an effective exchange rate is a weighted average of a basket of foreign currencies, and it can be viewed as an overall measure of the country's external competitiveness. A nominal effective exchange rate (NEER) is weighted with the inverse of the asymptotic trade weights. A real effective exchange rate (REER) adjusts NEER by appropriate foreign price level and deflates by the home country price level. Compared to NEER, a GDP weighted effective exchange rate might be more appropriate considering the global investment phenomenon.
Read more about this topic: Exchange Rate
Famous quotes containing the words effective, exchange and/or rate:
“A nation fights well in proportion to the amount of men and materials it has. And the other equation is that the individual soldier in that army is a more effective soldier the poorer his standard of living has been in the past.”
—Norman Mailer (b. 1923)
“So long as the system of competition in the production and exchange of the means of life goes on, the degradation of the arts will go on; and if that system is to last for ever, then art is doomed, and will surely die; that is to say, civilization will die.”
—William Morris (1834–1896)
“If you could choose your parents,... we would rather have a mother who felt a sense of guilt—at any rate who felt responsible, and felt that if things went wrong it was probably her fault—we’d rather have that than a mother who immediately turned to an outside thing to explain everything, and said it was due to the thunderstorm last night or some quite outside phenomenon and didn’t take responsibility for anything.”
—D.W. Winnicott (20th century)