Currency devaluation is when a country deliberately lowers the value of its currency relative to another currency, or group of currencies.

Currency devaluation makes a country’s exports cheaper on world markets and thus it boosts sales at the expense of its trading partners. This, in turn, means that a country’s imports are more expensive, making domestic consumers less likely to purchase them which further strengthens domestic businesses.

Higher exports relative to imports increases aggregate demand, which can lead to inflation.

<< Back to Glossary Index