Depreciation and Devaluation are two different economic terms that actually deals with the country’s currency value. Both currency depreciation and currency devaluation end up with a currency that is worth less than it previously was in comparison to the currencies of other countries. Depreciation Depreciation of the currency happens when the country follows a flexible exchange rate. Flexible interest rate means that the value of the currency is determined by the demand and supply and the central bank doesn’t intervene in it. A floating exchange rate means that the global investment market determines the value of a country’s currency. These countries allow supply and demand to determine the value of their currency relative to the currencies of other countries. Depreciation occurs when the forces of supply and demand cause the value of their currency to drop Devaluation It happens in countries with fixed exchange rate. In a fixed exchange rate , central bank decides what should be the value of its currency compared to other countries. The Central bank intervenes by buying or selling government securities to keep its exchange rates fixed. Devaluating a currency is decided by the government issuing the currency, and unlike depreciation, is not the result of non-governmental activities. One reason a country may devaluate its currency is to combat trade imbalances. Devaluation causes a country’s exports to become less expensive, making them more competitive on the global market. This in turn means that imports are more expensive, making domestic consumers less likely to purchase them. While devaluating a currency can seem like an attractive option, it can have negative consequences. By making imports more expensive, it protects domestic industries who may then become less efficient without the pressure of competition. Higher exports relative to imports can also increase aggregate demand, which can lead to inflation. MECHANISM FOR DEVALUATION A Country’s exchange rate is essentially set by the market forces. However, the Central Bank of a country can intervene in the market to effect devaluation by increasing the supply of its currency to buy other currencies, thereby causing fall in the value of its own currency. Another way of devaluing home currency is quantitative easing which has become common in 2009 and 2010.In quantitative easing, the Central Bank of the country increa
It’s in reality a great and useful piece of info. I am glad
that you just shared this helpful info with us. Please keep us
informed like this. Thank you for sharing.
I just could not go away your web site before suggesting that I actually loved the standard information an individual supply in your visitors?
Is going to be again regularly in order to inspect new
posts
These are truly wonderful ideas in concerning
blogging. You have touched some nice points here. Any way keep up wrinting.
I don’t know if it’s just me or if everybody else experiencing problems with
your site. It appears as though some of the written text within your content are running off the screen. Can somebody else please comment and let me know if this is happening to them as well?
This might be a issue with my browser because
I’ve had this happen before. Thank you
This page truly has all the information and facts I needed about this subject and didn’t know who to ask.
I conceive this internet site has some very superb information for everyone :D. “Experience is not what happens to you it’s what you do with what happens to you.” by Aldous Huxley.
Hello there, You’ve done an excellent job. I’ll definitely digg
it and personally recommend to my friends.
I am sure they’ll be benefited from this website.
I’m impressed, I have to admit. Rarely do I encounter a blog that’s both educative and entertaining, and without a doubt, you’ve hit the nail about the head.
The problem is an issue that too few everyone is
speaking intelligently about. I’m delighted that we stumbled on this during my look for something concerning this.
Thank you a bunch for sharing this with all of us you really recognise what you
are talking about! Bookmarked. Kindly additionally
talk over with my site =). We could have a link exchange contract between us
Its like you read my mind! You appear to know so much about this, like you wrote the
book in it or something. I think that you can do with a few pics
to drive the message home a little bit, but other than that, this is great blog.
A fantastic read. I will certainly be back.
This paragraph provides clear idea designed for the new visitors of blogging, that
truly how to do blogging and site-building.
Hi, I really do think it is a great web site. I stumbledupon it 😉
I am going to return again since i have book marked it.
Money and freedom is the greatest approach to change, may you
be rich and continue to guide others.