Serving the Quantitative Finance Community
Real Effective Exchange Rate
Can anyone tell me why a decling real effective exchange rate is good for a country?
Real Effective Exchange Rate
It really depends on which aspect you are looking at. Normally, lower real effective forex would help the country's export and thus stimulating the domestic economy(this is what Asian Economies always do as their domestic demands are very limited). However, it could be bad as well, like currently, lower real effective forex means you have to pay more for import, thus importing higher inflation amid escalating energy bills and its pass-thru effects.