function calculateNEER() {
var w1 = parseFloat(document.getElementById('weight1').value) || 0;
var b1 = parseFloat(document.getElementById('base1').value) || 0;
var c1 = parseFloat(document.getElementById('curr1').value) || 0;
var w2 = parseFloat(document.getElementById('weight2').value) || 0;
var b2 = parseFloat(document.getElementById('base2').value) || 0;
var c2 = parseFloat(document.getElementById('curr2').value) || 0;
var w3 = parseFloat(document.getElementById('weight3').value) || 0;
var b3 = parseFloat(document.getElementById('base3').value) || 0;
var c3 = parseFloat(document.getElementById('curr3').value) || 0;
var totalWeight = w1 + w2 + w3;
if (totalWeight === 0) {
alert("Please enter trade weights for at least one partner.");
return;
}
if (b1 === 0 || b2 === 0 || b3 === 0) {
alert("Base exchange rates cannot be zero.");
return;
}
// Individual Indices: (Current / Base) * 100
// This assumes rates are quoted as Domestic per Foreign (e.g., 1.2 USD per 1 EUR)
var index1 = (c1 / b1) * 100;
var index2 = (c2 / b2) * 100;
var index3 = (c3 / b3) * 100;
// Weighted Average
var neer = ((w1 * index1) + (w2 * index2) + (w3 * index3)) / totalWeight;
var displayResult = document.getElementById('neer-result-display');
var valSpan = document.getElementById('neer-final-val');
var descSpan = document.getElementById('res-desc');
valSpan.innerHTML = neer.toFixed(2);
displayResult.style.display = 'block';
if (neer > 100) {
var diff = neer – 100;
descSpan.innerHTML = "The index is above 100, indicating a " + diff.toFixed(2) + "% nominal depreciation of the domestic currency against the trade-weighted basket compared to the base period.";
valSpan.style.color = "#e67e22";
} else if (neer < 100) {
var diff = 100 – neer;
descSpan.innerHTML = "The index is below 100, indicating a " + diff.toFixed(2) + "% nominal appreciation of the domestic currency against the trade-weighted basket compared to the base period.";
valSpan.style.color = "#27ae60";
} else {
descSpan.innerHTML = "The index is exactly 100, indicating no change in the nominal effective exchange rate from the base period.";
valSpan.style.color = "#2c3e50";
}
}
What is the Nominal Effective Exchange Rate (NEER)?
The Nominal Effective Exchange Rate (NEER) is an unadjusted weighted average value of a country's currency relative to a basket of other major currencies. It serves as a vital indicator of a country's international competitiveness and the strength of its currency in the global market.
How the NEER Calculation Works
Unlike a bilateral exchange rate (like USD/EUR), which only compares two currencies, the NEER looks at the "effective" value of a currency. To calculate it, economists identify the country's main trading partners and assign a "weight" to each based on the volume of trade (exports and imports).
The standard formula for an arithmetic NEER index is:
NEER = Σ (wi × (ei / ei0) × 100)
wi: The trade weight assigned to currency i.
ei: The current exchange rate of the domestic currency against currency i.
ei0: The exchange rate during the base period.
NEER vs. REER: What's the Difference?
While NEER measures the nominal value of a currency, the Real Effective Exchange Rate (REER) takes it a step further by adjusting for inflation differentials between the home country and its trading partners.
The NEER tells you how much more or less of a foreign currency basket you can buy with your domestic currency. The REER tells you how the actual purchasing power has changed, which is a more accurate measure of trade competitiveness.
Interpreting the Results
When using this calculator, the interpretation depends on how the exchange rates are quoted. If rates are quoted as Domestic Currency per Unit of Foreign Currency (e.g., how many Pesos per 1 USD):
NEER > 100: Indicates a depreciation. The domestic currency has lost value; it now takes more domestic units to buy the same basket of foreign goods.
NEER < 100: Indicates an appreciation. The domestic currency has gained value; it is now "stronger" against the basket.
Example Scenario
Imagine Country A trades with two partners:
Partner
Weight
Base Rate
Current Rate
Partner 1
60%
1.00
1.10
Partner 2
40%
2.00
2.00
In this case, the domestic currency depreciated by 10% against Partner 1 but remained stable against Partner 2. The weighted NEER would be 106, representing an overall 6% depreciation against the trade basket.