Effective exchange rate refers to a weighted average exchange rate index, and the effective exchange rate weighted by the proportion of trade reflects the overall competitiveness and overall fluctuation range of a country's currency exchange rate in international trade. We know that products from one country may use different exchange rates when exported to different countries. In addition, when a country's currency appreciates against one currency, it may depreciate against another. Even if the currency depreciates (or appreciates) against other currencies at the same time, the magnitude may not be exactly the same. Therefore, from the end of 1970s, people began to observe the overall fluctuation range of a currency and its overall position in the international economy, trade and finance with the effective exchange rate. Effective exchange rate formula: effective exchange rate of a currency = ∑ exchange rate index of a currency against I currency (based on 100) × trade volume of a country with I country/total trade volume of a country. The real effective exchange rate is the weighted average of the bilateral nominal exchange rates of a country's currency and all its trading partners' currencies, excluding the influence of inflation on the purchasing power of each country's currency. In the concrete empirical process, people usually divide the effective exchange rate into nominal effective exchange rate and real effective exchange rate. The nominal effective exchange rate of a country is equal to the weighted average of the bilateral nominal exchange rates of its currency and the currencies of all trading partners. If the influence of inflation on the purchasing power of currencies in various countries is excluded, the real effective exchange rate can be obtained. The real effective exchange rate not only considers the relative changes of all bilateral nominal exchange rates, but also excludes the influence of inflation on the change of the value of the currency itself, which can comprehensively reflect the external value and relative purchasing power of the domestic currency. At present, the popular weighted average methods are arithmetic weighted average and geometric weighted average. When calculating the effective exchange rate, researchers often design calculation methods of related parameters such as weighted average, sample currency range and trade weight according to their own special purposes, and the results may be different. (1) According to the evolution of the international monetary system, there are fixed exchange rates and floating exchange rates ① fixed exchange rates. Refers to the exchange rate set and announced by the government, which can only float within a certain range. ② Floating exchange rate. Refers to the exchange rate determined by market supply and demand. Its fluctuation is basically free, and a country's money market has no obligation to maintain the exchange rate level in principle, but it can intervene when necessary. (2) According to the method of setting exchange rate, there are basic exchange rate and arbitrage exchange rate ① basic exchange rate. When setting exchange rates, countries must choose a currency as the main comparison object, which is called the key currency. According to the comparison of the actual value of domestic currency and key currency, the exchange rate between domestic currency and key currency is calculated, which is the basic exchange rate. Generally speaking, the US dollar is the currency used more in international payment. All countries regard the US dollar as the main currency for setting exchange rates, and often regard the exchange rate against the US dollar as the basic exchange rate. 2 exchange rate arbitrage. It refers to the exchange rate calculated by countries according to the basic exchange rate against the US dollar, which directly reflects the value ratio between other currencies. (3) According to the angle of buying and selling foreign exchange by banks, there are buying exchange rate, selling exchange rate, intermediate exchange rate and spot exchange rate ① buying exchange rate. Also known as the buying price, that is, the exchange rate used by banks to buy foreign exchange from peers or customers. When the direct quotation method is adopted, the exchange rate with less foreign currency converted into local currency is the buying price, while the indirect pricing method is the opposite. ② Selling exchange rate. Also known as the selling price, that is, the exchange rate used by banks to sell foreign exchange to their peers or customers. When the direct quotation is adopted, the exchange rate with more foreign currency converted into local currency is the selling price, while the indirect pricing method is the opposite. There is a difference between buying and selling, which is the income of banks buying and selling foreign exchange, generally 1%-5%. The buying and selling exchange rates used by banks to buy and sell foreign exchange are also called interbank exchange rates, which are actually the buying and selling prices in the foreign exchange market. ③ Intermediate exchange rate. Is the average of the buying price and the selling price. Western newspapers often use the intermediate exchange rate to report exchange rate news, and the arbitrage exchange rate is also calculated by using the intermediate exchange rate set of related currencies. ④ Cash exchange rate. Generally speaking, foreign currency is not allowed to circulate in the country. Only by converting foreign currency into local currency can we buy domestic goods and services, thus generating the exchange rate for buying and selling foreign exchange cash, that is, the cash exchange rate. The exchange rate of cash should be the same as that of foreign exchange, which is reasonable, but because it is necessary to transport foreign currency cash to various issuing countries, it needs certain freight and insurance fees. Therefore, the exchange rate when banks receive foreign currency cash is usually lower than the foreign exchange purchase price; The exchange rate at which banks sell foreign currency cash is higher than other foreign exchange selling rates. (4) According to the foreign exchange payment method of the bank, there are wire transfer exchange rate, letter exchange rate and bill exchange rate ① wire transfer exchange rate. The telegraph exchange rate is the exchange rate at which domestic banks engaged in foreign exchange business entrust their overseas branches or correspondent banks to pay the payee by telegraph after selling foreign exchange. Due to the high speed of telegraphic transfer payment, the bank can't occupy the customer's capital position, and the international telegraph fee is high, so the telegraphic transfer exchange rate is higher than the general exchange rate. The rapid transfer of funds by telegraphic transfer is conducive to accelerating international capital turnover, so telegraphic transfer accounts for an overwhelming proportion in foreign exchange transactions. ② remittance exchange rate. Remittance exchange rate is the exchange rate used by the bank to issue a payment order and send it to the paying bank through the post office for transfer to the payee. Because it takes a certain time to send payment instructions, banks can occupy customers' funds during this time, so the exchange rate of letter transfer is lower than that of wire transfer. ③ Exchange rate of draft. The exchange rate of bill exchange refers to the exchange rate used when a bank opens a bill paid by its foreign branch or agent, gives it to the remitter, and the remitter carries it with him or sends it abroad for withdrawal. Because there is a time interval between selling and paying foreign exchange, banks can occupy customers' positions during this time, so the exchange rate of foreign exchange is generally lower than that of telegraphic transfer. There are short-term bills and long-term bills, and their exchange rates are also different. Because banks can use customers' funds for a longer time, the exchange rate of long-term bills is lower than that of short-term bills. (5) According to the delivery period of foreign exchange transactions, there are spot exchange rate and forward exchange rate ① spot exchange rate. Also known as spot exchange rate, it refers to the exchange rate that is delivered on the day or within two days of the transaction between the buyer and the seller. ② Forward exchange rate. Forward exchange rate is the exchange rate to be delivered in a certain period in the future, and the buyer and the seller sign a contract and reach an agreement in advance. On the delivery date, both parties will settle the payment according to the predetermined exchange rate and amount. Forward foreign exchange transaction is an appointment transaction, which is caused by the different demand time of foreign exchange buyers for foreign exchange funds to avoid the risk of exchange rate changes. The forward exchange rate is different from the spot exchange rate. This difference is called forward spread, including premium, discount and parity. Premium means that the forward exchange rate is more expensive than the spot exchange rate, discount means that the forward exchange rate is cheaper than the spot exchange rate, and parity means that the two are equal. (6) According to the severity of foreign exchange management, there are official exchange rate and market exchange rate ① official exchange rate. Refers to the exchange rate announced by state institutions (Ministry of Finance, Central Bank or Administration of Foreign Exchange). The official exchange rate can be divided into single exchange rate and multiple exchange rates. Multiple exchange rates are more than one foreign exchange rate set by a government for its own currency, which is a special form of foreign exchange control. Its purpose is to encourage exports, restrict imports and restrict the inflow or outflow of capital, thus improving the balance of payments. ② Market exchange rate. Refers to the real exchange rate for buying and selling foreign exchange in the free foreign exchange market. In countries with loose foreign exchange management, the officially announced exchange rate often only serves as the central exchange rate, while the actual foreign exchange transactions are conducted at the market exchange rate. (7) According to the bank's business hours, there are opening exchange rate and closing exchange rate ① Opening exchange rate. Also known as the opening price, it is the exchange rate used by foreign exchange banks when they start business on business days. ② Closing exchange rate. Also known as closing price, it is the exchange rate used by foreign exchange banks at the end of foreign exchange transactions on a business day.