Devaluation

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Liberty University *

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303

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Economics

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Jan 9, 2024

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The word I chose for this discussion thread is devaluation. Devaluation can be used when talking about multitude of things, however, for this post I’m going to talk about it with currency. According to our text book, devaluation can be defined as, “the deliberate downward adjustment in the official exchange rate, reduces the currency’s value.”[ CITATION Sat1 \l 1033 ] The article I chose to do research on speaks on the matter of currency devaluation and changes in oil prices. “Several studies have been conducted in African countries individually to determine the impact of oil price fluctuations and exchange rate devaluation on output growth. Currency devaluation has been envisaged as intentionally sinking the official exchange rate of a local currency vis-à-vis a foreign currency to financially adjust the domestic economy for a trade surplus. While currency devaluation implies more units of local currencies are needed to acquire foreign goods, including inputs for production, oil prices have been characterized by rises and fall concerning supply, demand, and other market forces.”[CITATION Dav23 \p 122 \l 1033 ] This quote from the article shows us that while currency can devalue, it doesn’t necessarily correlate with other goods devaluing. This article also goes on to talk about certain countries in Africa that give an illusion of increased rate exchange, however, that is not the case as the rates of local currencies have consistent devaluation. The United Sates also experiences this. “It is documented that the US trade balance reversed from a trade surplus in 1970 to a trade deficit in 1971. The US policy makers decided to devalue the dollar to correct the trade deficit in 1971. However, the trade deficit had not been reduced and even worsened in the following year.” [CITATION Che20 \l 1033 ] Currently there has been a lot of buzz around the topic of the devaluation of our currency. “Currency devaluation is an important topic in the history of international economics and finance. It has proved to impact positively on some economies’ growth and negatively on others.” [ CITATION Oju20 \l 1033 ] Devaluation is a very important topic, especially when it’s discussing currency rates. Works Cited Cheng, K. M. (2020, Janurary). Currency devaluation and trade balance: Evidence from the US services trade. Journal of Policy Modeling, 42 (1), 20-37. David, U., Ugbaka, M. A., Effiong, S. E., & Iyaji, D. (2023, February). Threshold of currency devaluation and oil price movements that stimulates industrial production. Corprate Covernance and Organizational Behavior Review, 7 (1), 122. Ojuolape, A., Agboola, Y. H., Moshood, A. K., & Abdullah, O. O. (2020). The Effects of Currency Devaluation on Output Growth in Developing Economies with Currency Crises. Satterlee, B. C. (n.d.). International Business With Biblical Worldview. McGraw-Hill Education.
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