Devalvaatioon

Devalvaatioon refers to the deliberate downward adjustment of a country's currency in relation to other currencies. This is typically undertaken by a government or its central bank. The primary goal of devalvaatioon is to make a country's exports cheaper for foreign buyers and imports more expensive for domestic consumers. This can stimulate export-led growth and help reduce trade deficits.

The decision to devalue a currency is usually made when a country faces persistent trade imbalances, high unemployment, or a need to boost its international competitiveness. A weaker currency can make a nation's goods and services more attractive on the global market, potentially leading to increased demand for its products and a corresponding increase in economic activity. Conversely, imports become more costly, which can encourage domestic production and consumption.

However, devalvaatioon is not without its drawbacks. It can lead to inflation as the cost of imported goods rises. It can also erode the purchasing power of citizens both domestically and when traveling abroad. Furthermore, if other countries retaliate by devaluing their own currencies, the intended benefits of devalvaatioon can be nullified, leading to currency wars. The effectiveness of devalvaatioon depends on various factors, including the elasticity of demand for exports and imports, as well as the overall economic conditions of the country and its trading partners.