What is REER?
A. REER Real Effective Exchange Rate is the NEER adjusted for relative inflation rates Q12. How are NEER and REER determined? A. The exchange rate index is conceptually very similar to a stock market index. Once the objective of determining an effective exchange rate is defined (for example, export competitiveness), several key issues need consideration for actual calculation. • The number of countries to be included (the major trading partners or competitors in third markets also?) • The weight of each chosen currency in the basket (trade-weighted) • The base period when the index is 100 • The choice of the measure of inflation (wholesale price index, retail price index, GDP deflator) • The mathematical formulation (arithmetic or geometric weights) In India the base year for the index is1993 and the basket consists currencies of our major trading partners such as US, UK, Japan, Italy, Germany and France. Q13. What is TT rate? A. One of the methods for effecting remittance abroad is by
