Economic data
Exchange rate’s woeful tale
THE preoccupation of exchange rate fundamentalists in Pakistan with a single, partial indicator — Real Effective Exchange Rate (REER) — is astonishing. As Nadeem ul Haque argued in an illuminating article, fixing or deliberately boosting exchange rates effectively ended with Bretton Woods’ collapse in the 1970s. Research has since confirmed that the exchange rate is a market price — the price of one currency in terms of another, determined by underlying economic conditions — and not a policy tool. Hence, the exchange rate is an endogenous variable reflecting domestic inflation, productivity, e