Pimpy  

Real Effective Exchange Rate – that is not the nominal exchange rate that we see.  The one we watch is called a nominal exchange rate.  We get 1307 dinar for every dollar…What is a Real Effective Exchange Rate (REER)? The weighted average of a county’s currency in relation to an index or basket of other major currencies…It’s making a comparison of goods sold.  They’re trying to see if they are competitive against other countries.  It’s not the same thing as a nominal exchange rate…an officially announced rate.  The Central Bank sets the exchange rate if it is fixed.  It doesn’t set the exchange rate if it’s floating, which is determined by supply and demand…One is dealing with good sold and the other is dealing with the actual exchange of one currency for the other.