The real exchange rate, as well as being influenced by the nominal exchange rate, also takes account of relative inflation rates so is a better measure of overall competitiveness. An exporter’s competitiveness is determined not just by the nominal exchange rate, but also by their cost of doing business relative to their foreign competitors.
And in response, we need to design a scheme of social and economic incentives to modernize the old systems and practices now blocking higher productivity growth, and to stimulate innovation.