Problem with interpretation of exchange rate

Question

I found an article in which one of explanatory variable is "neer". From this article "The rise (decline) in this variable points to the appreciation (depreciation) in excess of the appreciation of the Swiss franc."

Further we have "The positive sign of the coefficient means that the appreciation of domestic currencies vis-à-vis those of their trading partners relative (rise in neer) leads to higher price levels ceteris paribus."

So, I have several questions. Is neer local currency/swiss franc? How will look like the interpretation when we have swiss franc/local currency? Will in this situation the negative sign of the coefficient be?

Answer 1

NEER stands for nominal effective exchange rate and not the Swiss local currency. Essentially, this takes into account how the local currency moves with respect to its trading partners.

Example: if Switzerland trades only with the UK, an appreciation of the Swiss franc compared to USD would not make a difference to exporters/importers in Switzerland if GBP also appreciate against the USD by the same amount. In this case, NEER would remain the same.

Without knowing which article you're referring to (which "coefficient"), I can't say much about your other questions. In general, however, an appreciation in the currency, holding other currencies constant, will lead to an increase in NEER.