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Real Effective Exchange Rate Formula

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Real Effective Exchange Rate refers to the terminology which corrects the nominal exchange rate for changes in prices of goods and services between countries. Check FAQs

REER = \frac{CPI d \cdot NEER}{CPI f}

REER - Real Effective Exchange Rate?CPI_d - Consumer Price Index of Domestic Nation?NEER - Nominal Effective Exchange Rate?CPI_f - Consumer Price Index of Foreign Country?

Real Effective Exchange Rate Example

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Here is how the Real Effective Exchange Rate equation looks like with Values.

Here is how the Real Effective Exchange Rate equation looks like with Units.

Here is how the Real Effective Exchange Rate equation looks like.

0.7574 = \frac{1.03 \cdot 0.75}{1.02}

0.7574 = \frac{1.03 \cdot 0.75}{1.02}

0.7574 = \frac{1.03 \cdot 0.75}{1.02}

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Real Effective Exchange Rate Solution

Follow our step by step solution on how to calculate Real Effective Exchange Rate?

FIRST Step Consider the formula

REER = \frac{CPI d \cdot NEER}{CPI f}

Next Step Substitute values of Variables

∴

REER = \frac{1.03 \cdot 0.75}{1.02}

Next Step Prepare to Evaluate

∴

REER = \frac{1.03 \cdot 0.75}{1.02}

Next Step Evaluate

∴

REER = 0.757352941176471

LAST Step Rounding Answer

∴

REER = 0.7574

Real Effective Exchange Rate Formula Elements

Variables

Real Effective Exchange Rate

Real Effective Exchange Rate refers to the terminology which corrects the nominal exchange rate for changes in prices of goods and services between countries.

Symbol: REER

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Real Effective Exchange Rate

Consumer Price Index of Domestic Nation

Consumer Price Index of Domestic Nation refers to the price being established in the geographical boundaries of a country.

Symbol: CPI_d

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Consumer Price Index of Domestic Nation

Nominal Effective Exchange Rate

Nominal Effective Exchange Rate refers to the price of domestic currency in terms of a foreign currency.

Symbol: NEER

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Nominal Effective Exchange Rate

Consumer Price Index of Foreign Country

Consumer Price Index of Foreign Country refers to the price established outside the geographical boundaries of a country or say international market.

Symbol: CPI_f

Measurement: NAUnit: Unitless

Note: Value should be greater than 0.

Formulas to find Consumer Price Index of Foreign Country

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How to Evaluate Real Effective Exchange Rate?

Real Effective Exchange Rate evaluator uses Real Effective Exchange Rate = (Consumer Price Index of Domestic Nation*Nominal Effective Exchange Rate)/Consumer Price Index of Foreign Country to evaluate the Real Effective Exchange Rate, Real Effective Exchange Rate is defined as the product of the nominal exchange rate and the ratio of changes in prices between countries. Real Effective Exchange Rate is denoted by REER symbol.

How to evaluate Real Effective Exchange Rate using this online evaluator? To use this online evaluator for Real Effective Exchange Rate, enter Consumer Price Index of Domestic Nation (CPI_d), Nominal Effective Exchange Rate (NEER) & Consumer Price Index of Foreign Country (CPI_f) and hit the calculate button.

FAQs on Real Effective Exchange Rate

What is the formula to find Real Effective Exchange Rate?

The formula of Real Effective Exchange Rate is expressed as Real Effective Exchange Rate = (Consumer Price Index of Domestic Nation*Nominal Effective Exchange Rate)/Consumer Price Index of Foreign Country. Here is an example- 0.757353 = (1.03*0.75)/1.02.

How to calculate Real Effective Exchange Rate?

With Consumer Price Index of Domestic Nation (CPI_d), Nominal Effective Exchange Rate (NEER) & Consumer Price Index of Foreign Country (CPI_f) we can find Real Effective Exchange Rate using the formula - Real Effective Exchange Rate = (Consumer Price Index of Domestic Nation*Nominal Effective Exchange Rate)/Consumer Price Index of Foreign Country.

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Real Effective Exchange Rate Formula

Real Effective Exchange Rate Example

Real Effective Exchange Rate Solution

Real Effective Exchange Rate Formula Elements

Other formulas in Macroeconomics category

How to Evaluate Real Effective Exchange Rate?

FAQs on Real Effective Exchange Rate

Variable Name