---
title: "Real Effective Exchange Rate (REER) Explained"
description: "The Real Effective Exchange Rate (REER) measures a currency's value against others, helping assess export competitiveness for policymakers and economists."
url: "https://modeldiplomat.com/learn/glossary/real-effective-exchange-rate"
---

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Model Diplomat Research Team · Last reviewed June 22, 2026

TL;DR

- The Real Effective Exchange Rate is a trade-weighted average of a currency's value against a basket of foreign currencies, adjusted for relative price levels.
- How does REER differ from NEER?
- What does a REER value above 100 indicate?
- Which price index is used to compute REER?
- Why is REER calculated as a geometric rather than arithmetic mean?

[Civil Service & Diplomatic Exams](https://modeldiplomat.com/learn/civil-services/glossary)Updated June 22, 2026

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Example

In 2023-24, the Reserve Bank of India's 40-currency CPI-based REER rose above 105, prompting commentary that the rupee was overvalued and that exporters faced eroding competitiveness in merchandise markets.

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