Description

As from issue number 50, the Series of Economic Studies of the Central Bank of Chile will be called Studies in Economic Statistics.

This paper outlines the theoretical considerations of the Real Exchange Rate (RER). It also describes the actual RER calculation methodologies in several central banks and international organizations. While there is consensus on how the RER should theoretically be constructed, in practice, there are many differing approaches which are constantly under review. The main objective of the RER is to measure the international competitiveness of an economy relative to its major trading partners. The most common methodology considers international trade flows (including third countries) and the Consumer Price Index (CPI) as a deflator.