Real exchange rates

Real exchange rates

Exchange rates that have been adjusted for the inflation differential between two countries.

Real Exchange Rates

The purchasing power of two currencies relative to one another. While two currencies may have a certain exchange rate on the foreign exchange market, this does not mean that goods and services purchased with one currency cost the equivalent amounts in another currency. This is due to different inflation rates with different currencies. Real exchange rates are thus calculated as a nominal exchange rate adjusted for the different rates of inflation between the two currencies. See also: Purchasing power parity.
References in periodicals archive ?
Demand management should be complemented by microeconomic or institutional actions that improve the economy's structure and raise its potential growth rate for any inflation and real exchange rates.
In the aggregate, relative goods-prices compared across countries are defined as real exchange rates.
They pointed out that they intend to launch a new website and a social media page on which they will circulate the real exchange rates set in the market.
So, by the end of March, the central bank was very comfortable with the levels of both the nominal and real exchange rates since there was room for a limited decrease of the nominal exchange rate, allowing some appreciation of the Turkish lira.
Over long periods of time, movements in exchange rates should exactly offset cross-country inflation differentials, leaving real exchange rates unchanged.
Finding a relationship between real exchange rates and real interest rate differentials is one of the important topics in the field of international macroeconomics.
We discuss intuitively the role that market entry plays in the response to shocks to technology for both nominal and real exchange rates, as well as for consumption and other real quantities.
To stabilise prices and trade flows many developing countries are trying to manage their real exchange rates by official interventions.
1989), Real Exchange Rates, Devaluation and Adjustment: Exchange Rate Policy in Developing Countries, MIT Press, Cambridge.
PPP puzzles, a common term for two anomalies of real exchange rates, indicate long-run PPP failures as well (Mussa 1986; Rogoff, 1996; Taylor, Peel, and Sarno, 2001).
China rejected plans on Friday to use real exchange rates and currency reserves to measure imbalances and said trade figures rather than current account balances should be used to assess economic distortions.
Summary: PARIS - China rejected plans to use real exchange rates and currency reserves to measures global economic imbalances, casting doubt on the ability of Group of 20 major economic powers to reach agreement at a meeting on Friday.
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