Real Effective Exchange Rate Calculator

✖Consumer Price Index of Domestic Nation refers to the price being established in the geographical boundaries of a country.ⓘ Consumer Price Index of Domestic Nation [CPI_d]			+10% -10%
✖Nominal Effective Exchange Rate refers to the price of domestic currency in terms of a foreign currency.ⓘ Nominal Effective Exchange Rate [NEER]			+10% -10%
✖Consumer Price Index of Foreign Country refers to the price established outside the geographical boundaries of a country or say international market.ⓘ Consumer Price Index of Foreign Country [CPI_f]			+10% -10%

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

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Formula

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Real Effective Exchange Rate

Formula

`"REER" = ("CPI"_{"d"}*"NEER")/"CPI"_{"f"}`

Example

`"0.757353"=("1.03"*"0.75")/"1.02"`

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Real Effective Exchange Rate Solution

STEP 0: Pre-Calculation Summary

Formula Used

Real Effective Exchange Rate = (Consumer Price Index of Domestic Nation*Nominal Effective Exchange Rate)/Consumer Price Index of Foreign Country
REER = (CPI_d*NEER)/CPI_f
This formula uses 4 Variables

Variables Used

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

STEP 1: Convert Input(s) to Base Unit

Consumer Price Index of Domestic Nation: 1.03 --> No Conversion Required
Nominal Effective Exchange Rate: 0.75 --> No Conversion Required
Consumer Price Index of Foreign Country: 1.02 --> No Conversion Required

STEP 2: Evaluate Formula

Substituting Input Values in Formula

REER = (CPI_d*NEER)/CPI_f --> (1.03*0.75)/1.02

Evaluating ... ...

REER = 0.757352941176471

STEP 3: Convert Result to Output's Unit

0.757352941176471 --> No Conversion Required

FINAL ANSWER

0.757352941176471 ≈ 0.757353 <-- Real Effective Exchange Rate

(Calculation completed in 00.004 seconds)

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Created by Aashna

IGNOU (IGNOU), India

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BMS College of Engineering (BMSCE), Bangalore

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< 20 Macroeconomics Calculators

Operating Surplus

Go Operating Surplus = Value of Output-Intermediate Consumption-Compensation of Employees-Mixed Income-Consumption of Fixed Capital-Net Indirect Taxes

Components of Aggregate Demand

Go Components of Aggregate Demand = Private Consumption Expenditure+Investment Expenditure+Government Expenditure+Net Exports

Real Effective Exchange Rate

Go Real Effective Exchange Rate = (Consumer Price Index of Domestic Nation*Nominal Effective Exchange Rate)/Consumer Price Index of Foreign Country

Net Factor Income from Abroad

Go Net Factor Income from Abroad = Net Compensation of Employees+Net Income from Property and Entrepreneurship+Net Retained Earnings

National Disposable Income

Go National Disposable Income = National Income+Net Indirect Taxes+Net Current Transfers from the Rest of the World

Gross Domestic Product at Factor Cost

Go Gross Domestic Product at Factor Cost = Gross Domestic Product at Market Price+Subsidies-Indirect Taxes

Change in Money Supply

Go Change in Money Supply = (1/Required Reserve Ratio)*Change in Bank Reserves-(Initial Deposit Amount)

Personal Disposable Income

Go Personal Disposable Income = Personal Income-Personal Taxes-Miscellaneous Receipts of Government

Life Expectancy

Go Life Expectancy = Current Age of the Individual+Average Life Expectancy-Adjustment Factor

Private Final Consumption Expenditure

Go Private Final Consumption Expenditure = Household Final Consumption Expenditure+Non Profit Private Institutions FCE

Gross National Product at Market Price

Go Gross National Product at Market Price = Gross Domestic Product at Factor Cost+Net Factor Income from Abroad

Net Domestic Product at Factor Cost

Go Net Domestic Product at Factor Cost = Net Domestic Product at Market Price-Net Indirect Taxes

Net Domestic Product at Market Price

Go Net Domestic Product at Market Price = Gross Domestic Product at Market Price-Depreciation

Growth Rate of Money Supply

Go Growth Rate of Money Supply = Rate of Inflation+Growth Rate of Real Gross Domestic Product

Real Gross Domestic Product Per Capita

Go Real Gross Domestic Product Per Capita = Real Gross Domestic Product/Total Population

Expenditure Multiplier

Go Expenditure Multiplier = Initial Consumer Price Index/Change in Government Spending

Gross National Disposable Income

Go Gross National Disposable Income = Net National Disposable Income+Depreciation

Velocity of Money

Go Velocity of Money = Nominal Gross Domestic Product/Money Supply

Real Wage

Go Real Wage = Nominal Wage/Consumer Price Index

Simple Deposit Multiplier

Go Simple Deposit Multiplier = 1/Required Reserve Ratio

Real Effective Exchange Rate Formula

Real Effective Exchange Rate = (Consumer Price Index of Domestic Nation*Nominal Effective Exchange Rate)/Consumer Price Index of Foreign Country
REER = (CPI_d*NEER)/CPI_f

What do you mean by Real Effective Exchange Rate ?

Real Effective Exchange Rate is the purchasing power of a currency relative to another currency at current exchange rates and prices. It is the ratio of the number of units of a given country's currency necessary to buy a market basket of goods in the other country, after acquiring the other country's currency in the foreign exchange market, to the number of units of the given country's currency that would be necessary to buy that market basket directly in the given country. Thus the real effective exchange rate is the exchange rate times the relative prices of a market basket of goods in the two countries. For example, the purchasing power of the US dollar relative to that of the euro is the dollar price of a euro (dollars per euro) times the euro price of one unit of the market basket (euros/goods unit) divided by the dollar price of the market basket (dollars per goods unit), and hence is dimensionless. This is the exchange rate (expressed as dollars per euro) times the relative price o.

How to Calculate Real Effective Exchange Rate?

Real Effective Exchange Rate calculator uses Real Effective Exchange Rate = (Consumer Price Index of Domestic Nation*Nominal Effective Exchange Rate)/Consumer Price Index of Foreign Country to calculate 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 calculate Real Effective Exchange Rate using this online calculator? To use this online calculator 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. Here is how the Real Effective Exchange Rate calculation can be explained with given input values -> 0.656373 = (1.03*0.75)/1.02.

FAQ

What is 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 and is represented as REER = (CPI_d*NEER)/CPI_f or Real Effective Exchange Rate = (Consumer Price Index of Domestic Nation*Nominal Effective Exchange Rate)/Consumer Price Index of Foreign Country. Consumer Price Index of Domestic Nation refers to the price being established in the geographical boundaries of a country, Nominal Effective Exchange Rate refers to the price of domestic currency in terms of a foreign currency & Consumer Price Index of Foreign Country refers to the price established outside the geographical boundaries of a country or say international market.

How to calculate 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 is calculated using Real Effective Exchange Rate = (Consumer Price Index of Domestic Nation*Nominal Effective Exchange Rate)/Consumer Price Index of Foreign Country. To calculate Real Effective Exchange Rate, you need Consumer Price Index of Domestic Nation (CPI_d), Nominal Effective Exchange Rate (NEER) & Consumer Price Index of Foreign Country (CPI_f). With our tool, you need to enter the respective value for Consumer Price Index of Domestic Nation, Nominal Effective Exchange Rate & Consumer Price Index of Foreign Country and hit the calculate button. You can also select the units (if any) for Input(s) and the Output as well.

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