Finance
Real Effective Exchange Rate (REER)
Definition
A trade-weighted average of a country's currency against its trading partners, adjusted for inflation differentials.
Explanation
REER measures competitiveness — a rising REER means exports become more expensive relative to competitors. Central banks monitor REER to assess whether currency movements are creating competitive imbalances. A 10% REER appreciation typically reduces export growth by 2-3 percentage points.