Bulgarias real effective exchange rate down 3.5 pps y/y in July.

By bne IntelliNews September 17, 2012
Bulgarias real effective exchange rate (REER) rose by 1.5 points m/m in July 2012 after falling for four straight months, according to data published on the central bank website. The CPI-deflated indicator has been on a stable downward trend since the beginning of 2011 and despite the monthly increase, the latest value shows a 3.5 point drop y/y. The ULC-deflated REER has also dropped over the course of 2011, from 147.5 in December 2010 to 144.5 in Q1 2012. Thus, both indices point to a gain in competitiveness for the country. Weak euro, to which the Bulgarian lev is pegged, can partly explain this process. REER measures a countrys competitiveness compared to its main trading partners. To calculate REER, the exchange rate of the national currency is calculated against a basket of currencies and is deflated by the countrys price levels (given by CPI, GDP deflator or Unit Labour Cost). REER is typically measured as an index with a base of 100 and a rising REER means loss of competitiveness.

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