Devaluation of a Currency: Effects

Devaluation of a Currency: Effects

In the foreign exchange market when exchange rate of a domestic currency is cut down by its government against any foreign currency, it is called devaluation. It means official depreciation is devaluation.

Effects

  • Exports Cheaper: A devaluation of the exchange rate will make exports more competitive and appear cheaper to foreigners. This will increase demand for exports.
  • Imports More Expensive: A devaluation means imports, such as petrol, food and raw materials will become more expensive. This will reduce the demand for imports.
  • Increased Aggregate Demand (AD): Devaluation could cause higher economic growth. Therefore higher ....
Do You Want to Read More?
Subscribe Now
To get access to detailed content

Already a Member? Login here

Take Annual Subscription and get the following Advantage
The annual members of the Civil Services Chronicle can read the monthly content of the magazine as well as the Chronicle magazine archives.
Readers can study all the material since 2018 of the Civil Services Chronicle monthly issue in the form of Chronicle magazine archives.
Be an Annual Subscriber

Indian Economy