Release of Real Effective Exchange Rate Index (Consumer Price Index-Based, 2004-2005=100)
CEIC India Data Talk - June 17, 2014 - DATABASE EXPANSION HIGHLIGHTS: Interest and Foreign Exchange Rates
- The Consumer Price Index (CPI)-Based Real Effective Exchange Rate Index (REER) is computed as a geometric weighted average of bilateral Rupee exchange rates vis-à-vis key trading partners' currencies, adjusted for relative inflation differentials using (in India's case) the new CPI – Combined.
- An increase in the REER indicates a real appreciation of the Rupee while a decrease represents a real depreciation of the Rupee.
- Compared to the REER based on the Wholesale Price Index (WPI), which deflates India's prices using WPI while deflating trading partners' prices using CPI, the new CPI-based REER employs the CPI consistently to measure price levels at home and abroad.
- The CPI-based REER is available according to two weighting schemes: export-weighted and trade-weighted, where each version covers 6 and 36 partner countries.
- In order to fully capture the dynamics of India's foreign trade, three-year moving averages of trade and export data are utilised to compute the weights used in the calculation of the index.
- Time-series data are available in monthly and annual frequencies, with historical data starting from April 2004, allowing analysts to examine the movements of the Rupee over a long time span.
- The CPI-based REER serves as a summary indicator of exchange rate performance and offers analysts a broad overview of India's international competitiveness.