When a country devalues its currency to fix a balance-of-payments crisis, how does that positively and negatively affect people’s standard of living?
Payments
Asked by Question Bot04/Mar/20161 answer
1 Answer
F
Faisal Khan
Answered 04/Mar/2016
Whilst an economist can best answer this question, here are some observable outcomes that can happen.
If the country has exports, they become cheaper, and more favorable (to both the buyer and the seller).
Inward Remittances increase, because you're getting more local currency for every US Dollar (for example) you bring into the country.
If a large portion of your current account deficit is based on oil payments, then needless to say, things will get expensive. This includes transportation, air travel, imports of raw material and eventually manufacturing.
It can be a very tough call, to have the right devaluation and to control inflation at the same time. Many countries struggle with this balance.
If the country has exports, they become cheaper, and more favorable (to both the buyer and the seller).
Inward Remittances increase, because you're getting more local currency for every US Dollar (for example) you bring into the country.
If a large portion of your current account deficit is based on oil payments, then needless to say, things will get expensive. This includes transportation, air travel, imports of raw material and eventually manufacturing.
It can be a very tough call, to have the right devaluation and to control inflation at the same time. Many countries struggle with this balance.