BIS paper offers improved real exchange rate calculation

Maersk container ship - copyright Maersk

Existing models for calculating the real effective exchange rate (Reer) fail to account fully for global value chains, according to a working paper published by the Bank for International Settlements on May 8.

Nikhil Patel, Zhi Wang and Shang-Jin Wei propose a model that captures global value chains and differences across sectors in their paper, Global value chains and effective exchange rates at the country-sector level.

Current models tend to assume that only final – not intermediate – goods

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