Measure the value of your currency against a basket of trade partners. Input the exchange rate index (relative to a base year, e.g., 100) and the trade weight percentage for each partner.
Results:
NEER Index: 0
Warning: Weights must sum to 100% (Current: 0%)
Understanding the Effective Exchange Rate
The Effective Exchange Rate (EER) is a measure of the relative strength of a national currency compared to a "basket" of other major currencies. Unlike a simple bilateral exchange rate (like USD to EUR), the EER provides a broader picture of a country's international competitiveness and the purchasing power of its currency on the global stage.
How to Calculate the Nominal Effective Exchange Rate (NEER)
The Nominal Effective Exchange Rate is calculated as a weighted average of bilateral exchange rates. Economists typically use trade weights to reflect the importance of each partner country. The formula is generally expressed as:
NEER = Σ (Rate Indexi × Weighti)
Where:
Rate Indexi: The exchange rate of the home currency against partner i, expressed as an index (e.g., 105 means the home currency has appreciated 5% against that specific partner since the base period).
Weighti: The proportion of total trade (exports + imports) that the home country conducts with partner i.
Practical Example
Suppose the United States conducts trade with three partners with the following data:
Trading Partner
Rate Index
Trade Weight
European Union
110 (10% Appreciation)
50%
China
90 (10% Depreciation)
30%
Canada
100 (No Change)
20%
Calculation: (110 × 0.50) + (90 × 0.30) + (100 × 0.20) = 55 + 27 + 20 = 102. This indicates that the currency has effectively appreciated by 2% against its trading basket.
NEER vs. REER: What's the Difference?
While NEER measures nominal value, the Real Effective Exchange Rate (REER) adjusts the NEER for inflation differentials between the home country and its partners. REER is the preferred metric for analyzing a country's true external price competitiveness.
function calculateNEER() {
var r1 = parseFloat(document.getElementById('rate1').value);
var w1 = parseFloat(document.getElementById('weight1').value);
var r2 = parseFloat(document.getElementById('rate2').value);
var w2 = parseFloat(document.getElementById('weight2').value);
var r3 = parseFloat(document.getElementById('rate3').value);
var w3 = parseFloat(document.getElementById('weight3').value);
// Validation
if (isNaN(r1) || isNaN(w1) || isNaN(r2) || isNaN(w2) || isNaN(r3) || isNaN(w3)) {
alert("Please enter valid numeric values for all fields.");
return;
}
var totalWeight = w1 + w2 + w3;
var neer = (r1 * (w1 / 100)) + (r2 * (w2 / 100)) + (r3 * (w3 / 100));
// Normalize if total weight isn't 100 but user wants calculation
if (totalWeight !== 100 && totalWeight > 0) {
neer = ((r1 * w1) + (r2 * w2) + (r3 * w3)) / totalWeight;
}
// Display
document.getElementById('neer-result-container').style.display = 'block';
document.getElementById('neer-value').innerText = neer.toFixed(2);
var warningEl = document.getElementById('weight-warning');
var weightSpan = document.getElementById('total-weight-span');
if (Math.abs(totalWeight – 100) > 0.01) {
warningEl.style.display = 'block';
weightSpan.innerText = totalWeight.toFixed(1);
} else {
warningEl.style.display = 'none';
}
var interpretation = "";
if (neer > 100) {
interpretation = "The currency has appreciated by " + (neer – 100).toFixed(2) + "% relative to the base period against this basket.";
} else if (neer < 100) {
interpretation = "The currency has depreciated by " + (100 – neer).toFixed(2) + "% relative to the base period against this basket.";
} else {
interpretation = "The effective value of the currency remains unchanged from the base period.";
}
document.getElementById('neer-interpretation').innerText = interpretation;
}