What Determines the Effectiveness of a Currency: A Composite Index

The variety and diversity of currencies forms a significant aspect the international political economy especially global economic relations among countries. It can be said that “language” countries’ activities is variation displayed by their currencies. A plethora papers has indicated relationship between exchange rates many facets relations, with negative, positive, or even neutral link. Exchange fluctuate due to exogenous events endogenous choice. Whatever cause, it certain rate fluctuation influence features country’s economy. Specifically, affect macroeconomic variables, trade performance others. So, what are prerequisites shape its activities? These include international, aspects country. combination these factors shapes relative effectiveness “freedom” use currency achieve goals. current paper shows country fundamental freedom for this purpose. methodology adopted creation Composite Index.