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Exchange rate
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==Bilateral vs. effective exchange rate== [[File: Currency gnp weighted comparison 1999 2011.svg|thumb|Example of GNP-weighted nominal exchange rate history of a basket of 6 important currencies (US Dollar, Euro, Japanese Yen, Chinese Renminbi, Swiss Franks, Pound Sterling]] Bilateral exchange rate involves a currency pair, while an [[Trade weighted index|effective exchange rate]] is a weighted average of a basket of foreign currencies, and it can be viewed as an overall measure of the country's external competitiveness. A nominal effective exchange rate (NEER) is weighted with the inverse of the asymptotic trade weights. A real effective exchange rate (REER) adjusts NEER by appropriate foreign price level and deflates by the home country price level.<ref name="Erlat, Guzin and Arslaner, Ferhat"/> Compared to NEER, a GDP weighted effective exchange rate might be more appropriate considering the global investment phenomenon.
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