The Nominal Effective Exchange Rate (NEER)
has appreciated by 4.4 % between 2006 and 2014 and has depreciated slightly in
2015. Can we thus claim that this suggests an expansionary monetary policy.
No, the claim is not automatic. For instance, the depreciation may be
offset by an increase in domestic prices relative to foreign prices or it may
reflect a deterioration in the terms of trade ( i.e not in response to monetary
policy decision, but due to some change in world conditions).
