Nominal and Real Effective Exchange Rate for Bosnia and Herzegovina

Abstract

This paper is presenting the overview of theoretic approach to Real Effective Exchange Rate (REER) and Nominal Effective Exchange Rate (NEER) indicators calculation for Bosnia and Herzegovina. Special attention is dedicated to statistical difficulties in calculation and still limited implementation of this approach in Bosnia and Herzegovina. NEER and REER indices are indicators by themselves that BH has to work a lot to improve its competitiveness position. It is a widely known statement that a country's competitiveness improves when the relative price of its tradable goods declines. BH mostly trade with its raw materials, which are mostly natural wealth of the county like wood, coal and aluminium, so this cannot be a long-term and permanent solution for the country.