---
ticker: "KRREER"
title: "South Korea Real Effective Exchange Rate"
unit: ""
frequency: "Quarterly"
source: "Bank for International Settlements (2006)"
release: "Updated Quarterly"
category: "Exchange Rates"
country: "KR"
language: "en"
canonical: "https://kred.dev/en/series/KRREER"
license: "https://creativecommons.org/licenses/by-nc-nd/4.0/"
latest_value: 84.27
latest_date: "2026-06-30"
first_date: "2000-12-31"
observations_total: 103
observations_shown: 103
---

# South Korea Real Effective Exchange Rate

## Overview

A trade-weighted gauge of the won's real purchasing power and export competitiveness.

## Key Figures

|  | Value | Date |
|---|---|---|
| Latest | 84.27 | 2026-06-30 |
| Change from previous | -1.92 | 2026-03-31 |
| Change over one year | -6.99 | 2025-06-30 |
| Highest on record | 124.29 | 2006-12-31 |
| Lowest on record | 79.95 | 2009-03-31 |
| Period covered | 2000-12-31 – 2026-06-30 |  |
| Observations | 103 |  |

## Recent observations

| Date | Value | Change |
|---|---|---|
| 2000-12-31 | 101.87 |  |
| 2001-03-31 | 95.24 | -6.63 |
| 2001-06-30 | 95.63 | +0.39 |
| 2001-09-30 | 96.79 | +1.16 |
| 2001-12-31 | 97.15 | +0.36 |
| 2002-03-31 | 97.40 | +0.25 |
| 2002-06-30 | 100.65 | +3.25 |
| 2002-09-30 | 104.19 | +3.54 |
| 2002-12-31 | 102.76 | -1.43 |
| 2003-03-31 | 102.83 | +0.07 |
| 2003-06-30 | 100.84 | -1.99 |
| 2003-09-30 | 103.92 | +3.08 |
| 2003-12-31 | 100.46 | -3.47 |
| 2004-03-31 | 100.34 | -0.12 |
| 2004-06-30 | 102.57 | +2.23 |
| 2004-09-30 | 103.95 | +1.39 |
| 2004-12-31 | 106.45 | +2.50 |
| 2005-03-31 | 113.55 | +7.10 |
| 2005-06-30 | 116.64 | +3.09 |
| 2005-09-30 | 115.50 | -1.14 |
| 2005-12-31 | 115.89 | +0.38 |
| 2006-03-31 | 122.34 | +6.46 |
| 2006-06-30 | 123.68 | +1.34 |
| 2006-09-30 | 123.54 | -0.14 |
| 2006-12-31 | 124.29 | +0.75 |
| 2007-03-31 | 123.55 | -0.74 |
| 2007-06-30 | 123.58 | +0.04 |
| 2007-09-30 | 121.77 | -1.82 |
| 2007-12-31 | 118.52 | -3.25 |
| 2008-03-31 | 110.51 | -8.01 |
| 2008-06-30 | 102.46 | -8.05 |
| 2008-09-30 | 99.92 | -2.54 |
| 2008-12-31 | 81.28 | -18.64 |
| 2009-03-31 | 79.95 | -1.33 |
| 2009-06-30 | 87.78 | +7.83 |
| 2009-09-30 | 88.99 | +1.21 |
| 2009-12-31 | 92.13 | +3.14 |
| 2010-03-31 | 95.59 | +3.46 |
| 2010-06-30 | 95.58 | -0.01 |
| 2010-09-30 | 92.78 | -2.80 |
| 2010-12-31 | 93.52 | +0.74 |
| 2011-03-31 | 94.46 | +0.95 |
| 2011-06-30 | 95.50 | +1.03 |
| 2011-09-30 | 95.49 | -0.01 |
| 2011-12-31 | 91.81 | -3.68 |
| 2012-03-31 | 93.04 | +1.23 |
| 2012-06-30 | 92.06 | -0.97 |
| 2012-09-30 | 94.00 | +1.93 |
| 2012-12-31 | 96.51 | +2.51 |
| 2013-03-31 | 98.29 | +1.78 |
| 2013-06-30 | 95.74 | -2.55 |
| 2013-09-30 | 97.57 | +1.83 |
| 2013-12-31 | 100.83 | +3.26 |
| 2014-03-31 | 101.26 | +0.43 |
| 2014-06-30 | 105.19 | +3.92 |
| 2014-09-30 | 105.89 | +0.70 |
| 2014-12-31 | 102.64 | -3.25 |
| 2015-03-31 | 105.68 | +3.04 |
| 2015-06-30 | 105.93 | +0.26 |
| 2015-09-30 | 101.22 | -4.71 |
| 2015-12-31 | 103.28 | +2.05 |
| 2016-03-31 | 100.26 | -3.02 |
| 2016-06-30 | 101.31 | +1.06 |
| 2016-09-30 | 105.37 | +4.06 |
| 2016-12-31 | 104.73 | -0.64 |
| 2017-03-31 | 106.91 | +2.18 |
| 2017-06-30 | 107.05 | +0.14 |
| 2017-09-30 | 104.51 | -2.54 |
| 2017-12-31 | 106.12 | +1.62 |
| 2018-03-31 | 106.31 | +0.18 |
| 2018-06-30 | 107.14 | +0.83 |
| 2018-09-30 | 107.06 | -0.08 |
| 2018-12-31 | 107.39 | +0.33 |
| 2019-03-31 | 105.42 | -1.97 |
| 2019-06-30 | 102.22 | -3.20 |
| 2019-09-30 | 100.26 | -1.97 |
| 2019-12-31 | 101.30 | +1.05 |
| 2020-03-31 | 99.63 | -1.67 |
| 2020-06-30 | 98.93 | -0.70 |
| 2020-09-30 | 98.93 | -0.01 |
| 2020-12-31 | 102.51 | +3.58 |
| 2021-03-31 | 101.91 | -0.60 |
| 2021-06-30 | 101.76 | -0.15 |
| 2021-09-30 | 99.17 | -2.59 |
| 2021-12-31 | 97.91 | -1.26 |
| 2022-03-31 | 96.88 | -1.03 |
| 2022-06-30 | 96.86 | -0.02 |
| 2022-09-30 | 94.55 | -2.31 |
| 2022-12-31 | 94.40 | -0.15 |
| 2023-03-31 | 97.00 | +2.59 |
| 2023-06-30 | 95.28 | -1.72 |
| 2023-09-30 | 97.88 | +2.60 |
| 2023-12-31 | 98.27 | +0.39 |
| 2024-03-31 | 97.23 | -1.04 |
| 2024-06-30 | 95.47 | -1.76 |
| 2024-09-30 | 94.72 | -0.75 |
| 2024-12-31 | 92.95 | -1.77 |
| 2025-03-31 | 90.88 | -2.07 |
| 2025-06-30 | 91.26 | +0.38 |
| 2025-09-30 | 90.86 | -0.40 |
| 2025-12-31 | 87.62 | -3.24 |
| 2026-03-31 | 86.19 | -1.43 |
| 2026-06-30 | 84.27 | -1.92 |

## Definition

South Korea's real effective exchange rate is the Bank for International Settlements broad CPI-deflated index of the won against a trade-weighted basket, where a higher value is a real appreciation (Bank for International Settlements 2006; Klau and Fung 2006). The fundamentals-implied level is the conditional fitted value that relates this rate to contemporaneous macroeconomic fundamentals, and the deviation is the percent distance of the observed rate from that implied level.

On the available sample the won's real rate does not share a statistically validated long-run relationship with these fundamentals. The implied level is therefore reported as a conditional fitted value, namely the real rate consistent with current fundamentals under a maintained linear association, rather than as an equilibrium level the rate is expected to return to or a measure of misalignment. This absence of a long-run relationship is the well-documented disconnect between exchange rates and macroeconomic fundamentals.

A positive deviation indicates descriptively that the won is overvalued relative to its fundamentals at a given date and a negative deviation that it is undervalued, and the series interprets the current level of the rate rather than predicting that the distance will narrow.

## Methodology

The fundamentals-implied level and the deviation are produced by a reduced-form regression on contemporaneous fundamentals in three stages, namely variable construction, long-run testing, and conditional estimation.

**(1) Variable Construction.** The dependent variable is the log real effective exchange rate, and the fundamentals comprise the log relative consumer-to-producer price ratio as the Balassa-Samuelson proxy (Balassa 1964; Samuelson 1964; Égert 2002), net foreign assets scaled by GDP (Lane and Milesi-Ferretti 2007), the log terms of trade, and the 10-year ex-ante real interest differential. Each series is classified by the augmented Dickey-Fuller, KPSS, and Phillips-Perron tests, confirming none is integrated of order two.

**(2) Long-Run Testing.** Whether a long-run relationship exists is assessed by a battery rather than a single statistic. The battery comprises the Johansen (1991, 1995) trace and maximum-eigenvalue tests selected by the Pantula principle, the residual-based test of Engle and Granger (1987) read against the MacKinnon (1996) and Phillips and Ouliaris (1990) critical values, and the autoregressive-distributed-lag bounds test of Pesaran, Shin, and Smith (2001). The error-correction coefficient is judged against the Banerjee, Dolado, and Mestre (1998) distribution, and small-sample bounds (Narayan 2005) are used where the sample warrants. For the won the battery returns no validated relationship, consistent with the spurious-regression caution of Granger and Newbold (1974).

**(3) Conditional Estimation.** The conditional coefficients are estimated by dynamic ordinary least squares (Stock and Watson 1993) and cross-checked by fully-modified ordinary least squares (Phillips and Hansen 1990). The fundamentals-implied level is the antilog of the fitted value. The deviation is one hundred times the difference between the observed and fitted log rate. The contributions split the fitted value by fundamental.

## Applications in Economics

The variables entering the fundamentals-implied level are the standard long-horizon determinants of a real exchange rate. Relative productivity raises the relative price of nontradables and tends to appreciate the real rate through the Balassa-Samuelson channel (Balassa 1964; Samuelson 1964), net foreign assets enter through the intertemporal budget constraint and the transfer problem (Obstfeld and Rogoff 1995; Lane and Milesi-Ferretti 2002; Gourinchas and Rey 2007), and the terms of trade and the real interest differential capture income and portfolio effects (Edwards 1989; Chinn and Prasad 2003).

The fundamentals-implied level rests on a reduced-form tradition that relates the real exchange rate to contemporaneous macroeconomic fundamentals. This tradition regresses the real rate on the fundamentals above (Clark and MacDonald 1998) and extends the purchasing-power-parity benchmark and its qualifications (Nurkse 1945; Edwards 1989; Hinkle and Montiel 1999). It sits alongside the macroeconomic-balance and structural approaches directed at the same purpose (Williamson 1994; Driver and Westaway 2004; MacDonald 2007; Égert, Halpern, and MacDonald 2006), of which the cross-country database of Couharde et al. (2018) is one large implementation.

Korea is an instructive case for why a sign-correct fit need not be a level the rate returns to. Its net foreign asset position rose to a large surplus over the sample while the real rate depreciated, the reverse of the textbook transfer effect. This pattern is consistent with precautionary reserve accumulation and high national saving after the 1997–98 crisis (Aguirre and Calderón 2005; Rodrik 2008; Bénassy-Quéré, Béreau, and Mignon 2010). The empirical fragility of fundamentals-based real-rate models is itself well documented (Razin and Collins 1997; Cheung, Chinn, and Pascual 2005; Catão and Milesi-Ferretti 2014), and external-sector assessments report wide bands around any such estimate (Phillips et al. 2013).

The honest use of this series is surveillance. A large deviation flags a real rate far from what current fundamentals would imply and prompts investigation of valuation effects, capital flows, or policy, rather than asserting that the distance will narrow.

## Applications in Financial Markets

For market participants the central fact is the disconnect itself. At horizons up to a year or two, macroeconomic fundamentals describe exchange rates no better than a random walk (Meese and Rogoff 1983; Cheung, Chinn, and Pascual 2005; Rossi 2013). The present-value logic of Engel and West (2005) explains why a rate driven by persistent expected fundamentals behaves nearly as a random walk. The deviation series is therefore not a trading signal, and the evidence that real-rate cheapness anticipates subsequent currency returns is weak and regime-dependent (Jordà and Taylor 2012).

What carries information at the level of currency pricing is the cross-section rather than any single valuation gauge. Carry, value, and momentum price currencies in ways a single real-rate measure does not (Menkhoff et al. 2012; Della Corte, Sarno, and Sestieri 2012). Currency crises are likewise better flagged by external and financial vulnerability indicators than by a valuation measure (Kaminsky, Lizondo, and Reinhart 1998; Frankel and Rose 1996; Burnside, Eichenbaum, and Rebelo 2011).

Read in that spirit, the deviation is a descriptive input to a broader external-vulnerability picture rather than a standalone trading signal. Analysts and risk managers monitoring external risk use it for scenario design and for placing the won's level in the context of its fundamentals, and it is most useful read alongside the platform's cross-currency basis, financial-conditions, and external-balance indicators.

## Statistical Tests

KRREER is the observed broad real effective exchange rate, tested as a quarterly non-seasonally-adjusted log-level over 102 observations from 2000-12-31 to 2026-03-31. No clean order of integration is assigned, since the augmented Dickey-Fuller test of Dickey and Fuller (1979), run in the lag augmentation of Said and Dickey (1984), returns a statistic of −3.261 at p = 0.073 and the Phillips and Perron (1988) test with a Newey and West (1987) long-run variance returns −2.137 at p = 0.525, both failing to reject the unit root, while the KPSS test (Kwiatkowski et al. 1992) fails to reject stationarity at a statistic of 0.082 with p above 0.10, so the opposite-null pair does not resolve.

On the differenced log the Ljung and Box (1978) portmanteau fails to reject white noise at both rungs, with Q statistics of 8.808 and 12.467 at p = 0.066 and p = 0.132, and the Bai and Perron (1998, 2003) procedure finds no break in the mean of the differenced series. For this quarterly index the HEGY test of Hylleberg et al. (1990) rejects seasonal unit roots at a statistic of 197.5, the seasonal-dummy F following Ghysels and Osborn (2001) fails to reject deterministic seasonality at a statistic of 0.353 with p = 0.787, and the QS portmanteau of Canova and Hansen (1995) fails to reject residual seasonality at a statistic of 15.422 with p = 0.051, quarterly averaging attenuating but not precluding seasonality.

## Frequently Asked Questions

### What is the real effective exchange rate?

The won against a trade-weighted basket of currencies, deflated by relative prices, so a rise denotes real appreciation. It is a composite measure of price competitiveness rather than a bilateral rate against any one currency.

### What is the REER fundamentals-implied level?

A conditional fitted value linking the real effective rate to contemporaneous macro fundamentals. It is a reference level conditional on those fundamentals, not an equilibrium exchange rate.

### Can the REER deviation be read as won overvaluation?

No. The estimated relationship is not cointegrated, a fact disclosed on the series itself. The deviation is therefore a descriptive distance from a conditional reference level and is no basis for expecting the won to revert.