The Real Exchange Rate (RER) represents the nominal exchange rate adjusted by the relative price of domestic and foreign goods and services, thus reflecting the competitiveness of a country with respect to the rest of the world. More in detail, an appreciation of the currency or a high level of domestic inflation reduces the RER, thus reducing the country's competitiveness and lowering the Current Account (CA). On the other hand, a currency depreciation generates an opposite effect, improving the country's CA.