Work in Progress

• A journey into the world of Effective Exchange Rates: differences and similarities (RR for Discussion Paper Series, Bank of Lithuania -- slides in "presentations")

Abstract:

We look at the available Effective Exchange Rate measures, both nominal and real, drawing comparisons across partners, weights, deflators, and frequencies. We use 10 sources for a total of 33 measures covering the period 1995-2019, with the inclusion of 2020 as check in case of availability. We focus on the euro area and some major advanced and emerging economies. The aim of this paper is to shed a light on the differences and provide a clear summary for researchers and policymakers in order to choose the appropriate ones giving their goals. The choice of the effective exchange rate turns out to be important in both the analysis of its impact on external balances as well as in the exchange rate pass-through.