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What is Numéraire?


Numéraire is an economic term referring to the standard to which value is computed. Numéraire is a French word, specifically translating to 'money', 'face value' or 'coinage' and ultimately, makes it possible to compare values and identify which goods are worth more/less than others.

Where have you heard about Numéraire?

When currencies were valued in the mid-twentieth century, the US dollar was priced in relation to gold, with all other currencies then being priced as either a fraction or multiple of the dollar. In this example, the dollar acted as the numéraire.

What you need to know about Numéraire.

As shown in the example above, numéraire generally acts as a benchmark value, with the value of similar goods then being worked out against the value of the numéraire or base good. The term 'numéraire goods' is also regularly used, referring to the goods with a fixed price that are used to facilitate calculations when only the relative prices are relevant. In economic analysis, when a good is referred to as the numéraire, it suggests that all other prices are 'normalised' by the price of that said good.

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