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:
“The only effective way to help well-intentioned, intelligent persons to do the best they can in raising children is to encourage and guide them always to do their own thinking in their attempts at understanding and dealing with child-rearing situations and problems, and not to rely blindly on the opinions of others.”
—Bruno Bettelheim (20th century)
“To coöperate in the highest as well as the lowest sense, means to get our living together. I heard it proposed lately that two young men should travel together over the world, the one without money, earning his means as he went, before the mast and behind the plow, the other carrying a bill of exchange in his pocket. It was easy to see that they could not long be companions or coöperate, since one would not operate at all. They would part at the first interesting crisis in their adventures.”
—Henry David Thoreau (1817–1862)
“If we became students of Malcolm X, we would not have young black men out there killing each other like they’re killing each other now. Young black men would not be impregnating young black women at the rate going on now. We’d not have the drugs we have now, or the alcoholism.”
—Spike Lee (b. 1956)