The purpose of the effective exchange rates is to provide important and comparable measures for price and cost competitiveness between countries. Еffective exchange rates are based on weighted geometric averages of bilateral exchange rates of the currency of one country against the currencies of a selection of trading partners. With correction for the relative movements of the national price or cost indicators (domestic economy and foreign economies - trading partners) the real effective exchange rate is calculated. The NBRNM calculates REER based on the following price indicators (deflators): consumer price indices, producer price indices and unit labour cost indices.
The increase in the index of the real effective exchange rate of the Denar is interpreted as an appreciation of the domestic currency and reduced price competitiveness, while the decrease of the index indicate depreciation and a corresponding increase in the competitiveness.
In December 2023, compared to the same month of 2022, REER deflated by consumer prices and producer prices appreciated by 2.4% and 5.4%, respectively. The developments reflect decline in relative consumer prices by 2.9% and in the relative producer prices by 0.1%. The nominal effective exchange rate registered an annual appreciation of 5.5%, mostly because of the appreciation of the Denar against the Turkish lira and Russian Ruble.
Archive on Effective Exchange Rate (REER)
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