{"id":1430,"date":"2021-04-28T01:38:52","date_gmt":"2021-04-28T01:38:52","guid":{"rendered":"https:\/\/enorcerna.com\/wiki\/what-is\/devaluation\/"},"modified":"2021-04-28T01:38:52","modified_gmt":"2021-04-28T01:38:52","slug":"devaluation","status":"publish","type":"post","link":"https:\/\/enorcerna.com\/wiki\/what-is\/devaluation\/","title":{"rendered":"Devaluation"},"content":{"rendered":"
\n

What is devaluation?<\/h2>\n

Devaluation is the loss or decrease in the face value of a currency<\/strong> compared to other foreign banknotes or coins.<\/strong><\/p>\n

The coins of each country represent a value that is related to the wealth of each nation, since the currency itself does not have a real value, but is a representative form.<\/p>\n

In this way, the devaluation of the currency causes a series of both positive and negative effects. What's more, there are different types of devaluation<\/strong>, as well as various causes that cause it.<\/p>\n

Causes of devaluation<\/h2>\n

The main causes for which a devaluation is generated are the following:<\/p>\n

    \n
  • Currency overvaluation<\/strong> local with respect to the foreign currency.<\/li>\n
  • Currency escape<\/strong> due to lack of investment of foreign capital.<\/li>\n
  • Lack of trust<\/strong> in local currency and politics.<\/li>\n
  • Deficit in the trade balance,<\/strong> that is, more imports than exports.<\/li>\n
  • Decision of the Central Bank of promote domestic production and lower imports.<\/strong><\/li>\n<\/ul>\n

    Effects of devaluation<\/h2>\n

    Devaluing a currency causes both advantages (positive effects) and disadvantages (negative effects).<\/p>\n

    positive effects<\/h3>\n

    Main positive effects<\/strong> of the currency devaluation are the following:<\/p>\n

      \n
    • As the national currency devalues, exports become more competitive<\/strong> compared to those made with higher value coins.<\/li>\n
    • Get expand international tourism, <\/strong>as it attracts foreign people whose currency is worth more.<\/li>\n
    • If you revise the increase in wages, you can optimize internal spending on national products, <\/strong>since the products that are imported tend to be more expensive.<\/li>\n<\/ul>\n

      Negative effects<\/h3>\n

      Devaluing a country's currency also produces certain Negative effects:<\/strong><\/p>\n

        \n
      • Social discontent that can manifest itself in a political cost and an economic crisis.<\/strong><\/li>\n
      • Large-scale increase in inflation.<\/strong><\/li>\n
      • Loss of real value <\/strong>of salary.<\/li>\n<\/ul>\n

        Types of devaluation<\/h2>\n

        Devaluation can be monetary, internal, competitive or fiscal. <\/strong><\/p>\n

          \n
        • Currency devaluation: <\/strong>It is caused by a series of causes, including distrust in the local currency, which in turn causes various inconveniences such as increased inflation and public services.<\/li>\n
        • Internal devaluation: <\/strong>The authorities can implement this type of devaluation by making adjustments in rents, wages and deficit reductions, as well as improvements that contribute to productivity to regain lost competitiveness.<\/li>\n
        • Competitive devaluation: <\/strong>Also called currency war, its objective is to provoke a competition between two or more countries, in which each country tries to get its local currency to have a low exchange rate that is beneficial to it.<\/li>\n
        • Tax devaluation: <\/strong>This revolves around the alteration of the prices of different taxes and aims to achieve economic competitiveness to optimize exports and reduce production costs.<\/li>\n<\/ul>\n<\/div>\n\n\n
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          What is devaluation? Devaluation is the loss or decrease in the face…<\/p>\n","protected":false},"author":1,"featured_media":1431,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"class_list":["post-1430","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-what-is"],"_links":{"self":[{"href":"https:\/\/enorcerna.com\/wiki\/wp-json\/wp\/v2\/posts\/1430","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/enorcerna.com\/wiki\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/enorcerna.com\/wiki\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/enorcerna.com\/wiki\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/enorcerna.com\/wiki\/wp-json\/wp\/v2\/comments?post=1430"}],"version-history":[{"count":0,"href":"https:\/\/enorcerna.com\/wiki\/wp-json\/wp\/v2\/posts\/1430\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/enorcerna.com\/wiki\/wp-json\/wp\/v2\/media\/1431"}],"wp:attachment":[{"href":"https:\/\/enorcerna.com\/wiki\/wp-json\/wp\/v2\/media?parent=1430"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/enorcerna.com\/wiki\/wp-json\/wp\/v2\/categories?post=1430"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/enorcerna.com\/wiki\/wp-json\/wp\/v2\/tags?post=1430"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}