June 2020 – Note on the revision of South Africa’s nominal and real effective exchange rate indices
A Joubert, P Phume and L Pickersgill
Last Modified Date:
2020-10-01, 09:31 PM
Quarterly Bulletins > Articles and Notes
The South African Reserve Bank (SARB) conducts regular revisions to the calculation of the effective exchange rate (EER) indices of the South African rand. These revisions include both the nominal effective exchange rate (NEER), which measures the external value of the rand against that of a weighted basket of South Africa’s largest trading partner countries, and the realeffective exchange rate (REER), which is an indicator of domestic producers’ competitiveness in foreign markets.The revised EER indices reflect changes in both major trading partner country coverage and corresponding weights due to the evolution of international trade patterns in manufactured goods.1 The current (2020) revision is based on trade data for the period 2015 to 2017, indexed to the base year 2015, whereas the previous revision (2014) was based on trade data from 2010 to 2012, indexed to the base year 2010 (Motsumi et al., 2014).This note briefly describes the underlying methodology used to compile South Africa’s EER indices,some observations pertaining to the 2020 revision as well as a review of changes over time in the composition of these indices. The revised weights applied in the calculation of the NEER and the REER will be effective from 2 January 2015 and the new indices will be published as from 3 August 2020. Further details related to these changes will be provided on the SARB’s website.