Devaluation: Mastering Devaluation, Navigating Global Finance with Confidence

By Fouad Sabry

What is Devaluation

In macroeconomics and modern monetary policy, a devaluation is an official lowering of the value of a country's currency within a fixed exchange-rate system, in which a monetary authority formally sets a lower exchange rate of the national currency in relation to a foreign reference currency or currency basket. The opposite of devaluation, a change in the exchange rate making the domestic currency more expensive, is called a revaluation. A monetary authority maintains a fixed value of its currency by being ready to buy or sell foreign currency with the domestic currency at a stated rate; a devaluation is an indication that the monetary authority will buy and sell foreign currency at a lower rate.

How you will benefit

(I) Insights, and validations about the following topics:

Chapter 1: Devaluation

Chapter 2: Currency

Chapter 3: Gold standard

Chapter 4: Exchange rate

Chapter 5: Hong Kong dollar

Chapter 6: Balance of payments

Chapter 7: Bretton Woods system

Chapter 8: Currency board

Chapter 9: Indian rupee

Chapter 10: Mexican peso crisis

Chapter 11: Foreign exchange reserves

Chapter 12: Impossible trinity

Chapter 13: Floating exchange rate

Chapter 14: Nixon shock

Chapter 15: Revaluation

Chapter 16: Currency intervention

Chapter 17: Fixed exchange rate system

Chapter 18: London Gold Pool

Chapter 19: Currency war

Chapter 20: International use of the U.S. dollar

Chapter 21: Fear of floating

(II) Answering the public top questions about devaluation.

(III) Real world examples for the usage of devaluation in many fields.

Who this book is for

Professionals, undergraduate and graduate students, enthusiasts, hobbyists, and those who want to go beyond basic knowledge or information for any kind of Devaluation.

• Language: English
• Publisher: One Billion Knowledgeable
• Release date: Mar 26, 2024

Book preview

Chapter 1: Devaluation

In macroeconomics and modern monetary policy, a devaluation is the official lowering of the value of a country's currency within a fixed exchange-rate system, wherein a monetary authority sets a lower exchange rate for the national currency in relation to a foreign reference currency or currency basket. Revaluation refers to a change in the exchange rate that causes the domestic currency to become more expensive. A monetary authority (such as a central bank) maintains the fixed value of its currency by being willing to buy or sell foreign currency with the domestic currency at a specified rate; a devaluation indicates that the monetary authority will buy and sell foreign currency at a lower rate.

However, under a floating exchange rate system (in which exchange rates are determined by market forces acting on the foreign exchange market, and not by government or central bank policy actions), a decrease in a currency's value relative to other major currency benchmarks is referred to as depreciation, and an increase in value is referred to as appreciation.

Inflation, which is a market-driven drop in the value of the currency in terms of goods and services, is a related but distinct notion (related to its purchasing power). It is a redenomination, not a devaluation or revaluation, to alter the face value of a currency without affecting its exchange rate.

Devaluation is most frequently employed when a currency has a predetermined value compared to the base. Historically, early currencies were typically gold or silver coins produced by an issuing body that confirmed the precious metal's weight and purity. A government in need of funds and short on precious metals could decrease the weight or purity of the coins without notice or declare that the new coins have the same worth as the old ones, therefore depreciating the currency. Later, when paper currency replaced coins, governments mandated that they be redeemable for gold or silver (a gold standard). Again, a government without gold or silver may devalue by decreeing a fall in the currency's redemption value, so decreasing the value of everyone's