Devaluation race

A devaluation race arises when individual economies consciously strive to devalue their currencies in order to benefit from the growth advantages that this generates.

By constantly undercutting one another, the rate of the currencies concerned on the foreign exchange markets usually falls considerably. The growth effects will not materialize, however, if several countries, which are linked by intensive trade, take part in the devaluation race. Because in this case you have no currency advantages over the most important trading partners, which would be the prerequisite for growth effects. At the same time, import prices are rising noticeably in the participating economies, which is fueling inflation.

As a result, a race to devalue usually does not lead to more growth, but only to higher inflation.

Was the explanation to "Devaluation race"Helpful? Rate now:

Weitere Erklärungen zu Anfangsbuchstabe "A"