Alternative Measures of the Swedish Real Effective Exchange Rate
This study presents alternative measures of the Swedish real effective exchange rate (REER), based on three alternative weighting schemes and three alternative price indices. Pros and cons of alternative measures are discussed in the context of the REER as an indicator of competitiveness. Bivariate VAR-models are estimated in an effort to conclude whether or not the alternative REER measures contain leading information on real GDP, real investments and real net exports. The results may be interpreted as empirical support for the supposition that REERs based on export prices reflect competitiveness primarily for internationally trade goods and services, while REERs based on consumer prices serve as a broader indicator of competitiveness.
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