Azerbaijan manat real effective exchange rate goes up

Azerbaijan manat real effective exchange rate goes up
# 17 April 2009 12:33 (UTC +04:00)
Baku. Vahab Rzayev - APA-Economics. As of March 1 the nominal effective exchange rate (NEER) of the manat (national currency) rose by 8.1% during January-February, said the Central Bank of Azerbaijan in a report.
At the same time, the NEER for non-oil sector jumped by 31.3% during the two months.
Meanwhile, the real effective exchange rate (REER) of the manat went up by 28.6% whereas the rise for non-oil sector was 23.7% during January.
The dramatic increase in exchange rate indexes is associated with a change in official rates of foreign currencies against local currency, and low inflation in trade partner countries as a result of the global financial crisis.
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.
However, this is case given that a long-term period is taken into account.