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Is the REER model of any use?

Every day, in the context of exchange rate management in India, one comes across proponents of a model called REER. REER has been, and continues to be used, to justify a weak rupee without regard to the fact that it is an inherently flawed model that has been abandoned across the world. However, knowledge of these flaws doesn’t stop influential proponents like Dr Shankar Acharya (Read: Indifference about the big rupee rise?) from screaming murder whenever the rupee appreciates. The Real Effective Exchange Rate model, or the REER model, provides relatively closed economies a means to ...