Real Effective Exchange Rate - REER


DEFINITION of 'Real Effective Exchange Rate - REER'

The weighted average of a country's currency relative to an index or basket of other major currencies adjusted for the effects of inflation. The weights are determined by comparing the relative trade balances, in terms of one country's currency, with each other country within the index.

BREAKING DOWN 'Real Effective Exchange Rate - REER'

This exchange rate is used to determine an individual country's currency value relative to the other major currencies in the index, as adjusted for the effects of inflation. All currencies within the said index are the major currencies being traded today: U.S. dollar, Japanese yen, euro, etc.

This is also the value that an individual consumer will pay for an imported good at the consumer level. This price will include any tariffs and transactions costs associated with importing the good.

  1. Inflation

    The rate at which the general level of prices for goods and services ...
  2. Tariff

    A tax imposed on imported goods and services. Tariffs are used ...
  3. Exchange Rate

    The price of a nation’s currency in terms of another currency. ...
  4. Balance Of Trade - BOT

    The difference between a country's imports and its exports. Balance ...
  5. Weighted Average

    An average in which each quantity to be averaged is assigned ...
  6. Base Currency

    The first currency quoted in a currency pair on forex. It is ...
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