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Real effective exchange rate of AZN on non-oil sector consolidates by 4.6%

Business Materials 27 November 2014 16:51 (UTC +04:00)
In order to prevent significant consolidation of AZN, and thereby eliminate the negative impact on the competitiveness of the non-oil sector in the first nine months of 2014, the Central Bank of Azerbaijan (CBA) conducted sterilization of currency in the amount of $1.2 billion

Baku, Azerbaijan, Nov.27

By Azad Hasanli - Trend:

In order to prevent significant consolidation of AZN, and thereby eliminate the negative impact on the competitiveness of the non-oil sector in the first nine months of 2014, the Central Bank of Azerbaijan (CBA) conducted sterilization of currency in the amount of $1.2 billion, said the report of the Central Bank's Monetary Policy in January-September 2014.

"The CBA has continued the exchange rate policy in 2014 within the framework of bilateral targeting of USD/AZN rate," the report said. "Parameters of the exchange rate policy in the first nine months of 2014 were determined taking into account the need to maintain macroeconomic policy, balance of payments, maintain financial stability in the banking sector and the competitiveness of non-oil sector."

It is noted that supply exceeds demand in the reporting period in state of a surplus of the balance of payments on the currency market, and that helps to consolidate the national currency.

Since the beginning of 2014, AZN rate versus USD rate has not changed, and consolidated by 0.03 percent.

The dynamics of the nominal bilateral exchange rate of AZN has influenced the change of the dynamics of the real bilateral exchange rates. During the reporting period, AZN consolidated both nominally and really in relation to the currencies of the Eurozone, Russia, Ukraine, Kazakhstan and Israel. AZN really cheapened against the currencies of the United States, Turkey, Georgia, Iran, UK, Japan, China, Belarus, South Korea and Switzerland.

In January-September, the nominal effective exchange rate (NEER) of AZN on the non-oil sector in the total trade turnover rose by 10.5 percent. Consolidation of NEER by one percent leads to lowering of prices by 0.28 percentage points, according to the model estimates.

The difference in consumer prices had a downward pressure on the real effective exchange rate (REER). During the reporting period, REER on the non-oil sector consolidated by 4.6 percent.

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