Definition & Methodology 1. NEER is the weighted geometric average of the bilateral nominal exchange rates of the home currency in terms of foreign currencies 2. REER is defined as a weighted geometric average of nominal exchange rates of the home currency in terms of the foreign currencies adjusted for relative price differential. 3. REER has 3 factors-exchange rate of respective countries, trade weights and relative prices. 4. Methodology - [Link](RBI_Monthly_Bulletin_Article_20140411_Real%20Effective%20Exchange%20Rate%20based%20on%20CPI%20as%20Price%20Index%20for%20India.pdf#page=3&selection=6,0,6,58) 5. 1993-94 (WPI) as base year - figures for the period 1994-95 to 2004-05 are based on Wholesale Price Index (WPI) series with base year 1993-1994=100 6. 2004-05 (CPI) as base year - figures for the period 2005-06 to 2024-25 are based on Consumer Price Index (CPI) with base year 2004-05=100 7. [Nov 04, 2005](RBI_Press%20Release_20051104_RBI%20to%20revise%20NEER-REER%20Indices.pdf) 1. The 5-country indices was replaced with new six-currency indices of NEER/REER. 2. The thirty six country indices have also been revised and replaced with new 36-currency indices of NEER/REER. 3. So REER index for Indian rupee started getting computed based on 6-currency as well as 36-currency basket > [!important] Further Reading > 1. Article [Real Effective Exchange Rate and its Implications for India’s Trade Balance](RBI_Monthly_Bulletin_Article_20241224_Real%20Effective%20Exchange%20Rate%20and%20its%20Implications%20for%20India’s%20Trade%20Balance.pdf) in RBI Monthly bulletin-December 2024 > 2. Article [A Suite of Approaches for Estimating Equilibrium Exchange Rates for India](RBI_Monthly_Bulletin_Article_20250117_A%20Suite%20of%20Approaches%20for%20Estimating%20Equilibrium%20Exchange%20Rates%20for%20India%202.0.pdf) in RBI Monthly bulletin-January 2025 > 3. Article [Effective Exchange Rate Indices of the Indian Rupee](RBI_Monthly_Bulletin_Article_20210121_Effective%20Exchange%20Rate%20Indices%20of%20the%20Indian%20Rupee.pdf) in RBI Monthly Bulletin-Jan 2021 ## April, 2014 1. April, 2014 - RBI started publishing CPI-only REER 1. [Box II.8-Box Information Content from the CPI-based REER](RBI_Annual%20Report_2014.pdf#page=73&selection=4,0,5,43) in RBI's Annual Report-2014 2. Article [Real Effective Exchange Rate based on CPI as Price Index for India](RBI_Monthly_Bulletin_Article_20140411_Real%20Effective%20Exchange%20Rate%20based%20on%20CPI%20as%20Price%20Index%20for%20India.pdf) in RBI Monthly bulletin-April 2014 2. Jan, 2021 - Base-year of REER was changed to 2015-16 from 2004-5, and 36-currency basked was increased to 40 and 2022-23 3. RBI releases this data as part of its communication policy and to aid researchers and analysts. ## Data Releases 1. Theses indices are published in the Bank's monthly Bulletin. 2. Data - REER from 1993-94 to 2008-09 in DRG Studies titled "Exchange Rate Policy and Modelling in India" dated Feb 25, 2010 ## References 1. Aug 15, 1997. Exchange Rate Management : Dilemmas. (by Dr. Y.V. Reddy at Goa on August 15, 1997). [pdf](RBI_Speech_19970815_Exchange%20Rate%20Management%20-%20Dilemmas_Y.V.Reddy.pdf) 2. Catão, L. A. V. (2007). What are real exchange rates? _Finance & Development_, _44_(3), 46–47. [pdf-1](IMF_Finance%20&%20Development_2007_%20What%20are%20real%20exchange%20rates?_Catão,%20L.%20A.%20V.pdf) | [pdf-2](IMF_Finance%20&%20Development_2007_%20What%20are%20real%20exchange%20rates?_Catão,%20L.%20A.%20V_2.pdf) | [Link](https://www.imf.org/en/publications/fandd/issues/series/back-to-basics/real-exchange-rates) 3. Govil, R. (2014, November 24–December 3). Exchange rates: Concepts, measurements and assessment of competitiveness [Lecture notes/Presentation slides]. IMF. [Link](https://www.imf.org/external/region/tlm/rr/pdf/nov5.pdf)