Estimating the Real Effective Exchange Rate (REER) by Using the Unit Labor Cost (ULC) in Romania

by Pelinescu, Elena and Caraiani, Petre
Published in Romanian Journal of Economic Forecasting,
volume 7 issue 4, 2006.

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The real effective exchange rate (REER) is one of the indicators that can provide good information about the competitiveness of a country. However, the computation of REER is not an easy task because of the lack of data in order to compute each country weight. In our paper we compute the weights by taking into account the third market effect according to Turner and Van't Dack's methodology (1993). We use different deflators in order to reveal their effects on the trajectory of the REER and on the competitiveness.

Keywords: real effective exchange rate, unit labor cost, international competitiveness
JEL Classification: F14, F16, F31