Real effective exchange rate of the manat climbs 15.1%

The REER is the weighted average of the country’s currency relative to currencies of major trading partners, and it is calculated by taking into account the country’s share in a given nation’s foreign trade.

That means an average rate of the manat against the currencies of countries involved in Azerbaijan’s foreign trade.

As the inflation rate in each country is assumed to broadly indicate the trends in domestic costs of production, the REER is expected to reflect foreign competitiveness of domestic products.

Nevertheless, effective exchange rate indicators are widely used to assess competitiveness.

An appreciation trend of the real effective exchange rate is considered unfavorable for the growth of export and import competing industries. This refers to the low competitiveness of domestic products.

One of the dimensions of the monetary policies pursued by the central bank in 2008 is the exchange rate policy.

Compared to trade partners, remarkably higher inflation rate in Azerbaijan indicates low competitiveness of the domestic economy.

/APA/