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:
“An effective human being is a whole that is greater than the sum of its parts.”
—Ida P. Rolf (1896–1979)
“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)
“Strange that the vanity which accompanies beauty—excusable, perhaps, when there is such great beauty, or at any rate understandable—should persist after the beauty was gone.”
—Mary A. [Elizabeth, Countess Von] Arnim (1866–1941)