What is ‘Devaluation’?
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What is ‘Devaluation’? Devaluation is a monetary policy tool used by countries to cause a deliberate downward adjustment to the value of a country's currency relative to another currency, group of currencies or standard. Some countries resort to devaluation of their currency for the benefit of the country. For example, this step may be taken for enhancing trade exchanges between this country and other countries since reducing the country’s currency value may result in a significant increase in exports because the currency of this country is less than other currencies in terms of value. Some countries use this technique in an attempt to overcome their economic problems, because it is obvious when the currency’s value is reduced, this leads to increased exports. But not all countries succeed in reaching this end. While devaluating a currency can seem like an attractive option, it can have negative consequences. For example, if the country devaluating its currenc...
