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The Sterling Effective Exchange Rate and Other Measures of UK Competitiveness

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  • Barrell, Ray
  • Choy, Amanda
  • Holland, Dawn
  • Riley, Rebecca

Abstract

Movements in exchange rates attract much attention, both for the signals they may contain about future inflation prospects and for their implications for the competitiveness of firms. However, movements in bilateral exchange rates, for instance in sterling against the dollar or the euro, do not convey enough information for either policymakers or for firms except in relation to specific bilateral transactions. It is useful to construct summary measures of exchange rate movements, and there are a number of ways of doing this. The choice of measure depends upon the use to which it is to be put. Some measures, such as the effective exchange rate, are summary indicators, whilst others such as export competitive indices are more relevant when evaluating the prospects for export developments. Some indicators weight together nominal exchange rates. Others are measures of real exchange rates, weighting together exchange rate adjusted relative prices. The indicators chosen should be seen in the context in which they are used.

Suggested Citation

  • Barrell, Ray & Choy, Amanda & Holland, Dawn & Riley, Rebecca, 2005. "The Sterling Effective Exchange Rate and Other Measures of UK Competitiveness," National Institute Economic Review, National Institute of Economic and Social Research, vol. 191, pages 54-63, January.
    • Handle: RePEc:cup:nierev:v:191:y:2005:i::p:54-63_6
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    Cited by:

    1. Yang Liu & BRUCE MORLEY, 2013. "Sovereign Credit Ratings, The Macroeconomy And Credit Default Swap Spreads," Brussels Economic Review, ULB -- Universite Libre de Bruxelles, vol. 56(3-4), pages 335-348.

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