b. NEER and REER

♤ Nominal Effective Exchange Rate (NEER)- is a multilateral rate representing the price of a representative basket of foreign currencies each weighted by its importance to the domestic currency in international trade (the average of export and import shares is taken as an indicator of this)

♤ Real Effective Exchange Rate (REER)- is calculated as the weighted average of the real exchange rates of all its trade partners, the weights being the shares of the respective countries in foreign trade. It is represented as the quantity of domestic goods required to purchase one unit of a given basket of foreign