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Azerbaijan manat real effective exchange rate hits 8-year high

29 October 2008 09:41 (UTC +04:00)

Baku Vahab Rzayev â€“ APA-Economics. The real effective exchange rate (REER) of the manat (national currency) climbed 15.1% during January-September, an eight-year high since 2000, said the National Bank of Azerbaijan.
The REER is the weighted average of the countryâ€™s currency relative to currencies of major trading partners, and it is calculated by taking into account the countryâ€™s share in a given nationâ€™s foreign trade.
That means an average rate of the manat against the currencies of countries involved in Azerbaijanâ€™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.