The measurement of effective exchange rates

Abstract

This paper reviews some of the major conceptual and methodological issues involved in the constructions of EER indices, focusing on nominal effective exchange rates. It then describes a mixed-weight index currently compiled by the BIS and subsequently analyses how the movements of the various indices have differed over time. No objective yardstick is provided whereby one index can be shown to be superior, although there is probably already more international agreement in this domain than meets the eye.