Hello

Depreciation of your currency would mean foreigners need to pay now lesser amount of their currency to buy the goods your country exports. i.e the foreign price of your exports decreases and their demand increases. but it also obviously depends upon the nature of commodity you are exporting and the price and income elasticity.

Devaluation can attract people to buy goods in a country. However it may create a short term growth, as international banks may not trust countries in these conditions for long.

Yes it works .There is a positive relationship .you will find a lots of article in this regards.just google .thanks

Check this link https://www.researchgate.net/post/What_are_the_impact_of_devaluation_of_currency_on_the_economy_of_a_country

You need to understand Marshall Lerner condition and j curve hypothesis

Not necessaruly. Pricr is only one factor. There are other important factors.

It does certainly. But if everyone does the same thing ( currency devaluation), then there is a problem.

Simple answer is yes-price-demand relationship. As price goes down demand goes up. To find out exact relationship in a specific country you have to control many factors which may also affect demand. A large number of studies explored this relationship you can explore on net to understand this relationship.

Yes, but its real devaluation not just nominal devaluation. Furthermore, it depends on few conditions; (1) Marshal Lerner condition must satisfy (2) in the short run it goes into deficit and then in the medium run trade deficit starts improving, it is known as J-curve effect, (3) we should have exportable surpluses to export it plus we should have diversification of exports and markets are explored where do we want to send our products.

The attempt of a country's currency devaluation to gain greater competition in export is a scam because a national competitiveness is not achieved by the devaluation of the national currency. What about an import of goods and services and public and private debts. In transition economies, a significant number of citizens have loans denominated in foreign currencies and they would have been brought to virtually the edge of existence......

Expansion of exports depends on the avsilabilty of right products, profuctivity and quality of the profduct. Export price alone is not that iportant. Further , as exports of manufsctured goods in most developing countries is very import intensive, price of export is not much affected by devaluation. Moreover, devaluation has inflatioary impact.

yes, because a weaker domestic currency stimulates exports and makes imports more expensive. Conversely, a strong domestic currency hampers exports and makes imports cheaper ...

Not necsrily

Mehdi

You are right, it depends on economic structure because in many countries their industries have a strong relationship with the imports.

The books on international trade indeed tell that it will promote export. But we need a kind of general equilibrium model to see details in interconnection.

A lot depends what % of GDP is traded and what is sold in domestic market. Currency devaluation (assuming sticky wages in domestic currency) means lower purchasing possibility of imported goods by local population. At the same time, the value of exports in domestic currency will grow (but not necessary in foreign, it depends...). This can help a country to solve the problem of trade deficit (but only if is has no foreign debt nominated in domestic currency). Argentina after devaluation had a problem to repay the debt denominated in dollars.

Very often goods for export differ from goods for domestic consumption. Consider the case when oil is exported but food is imported. Russia has devalued its currency in the time of low oil price (2014). Dollar income of population had dropped, the price of imported goods went up, but dollar price of domestic goods went down. It cannot substantially increase oil production, just a bit, and the value of exports went down, as well as the country's budget nominated in $...

Can anybody refer to a cpuntry case whete devaluation succeedef increasing value of exports Significantly?

I fully agree with Dr Yuri Yegorof. We should conduct this type of analysis with General equilibrium models. you will explore on the net. There are a large number studies which have used CGE Model. In partial equilibrium we ignore a number of factors such as domestic demand composition, foreign inflows etc which are necessary to take into account in this type of analysis.

But thete have already been genral equlibrium anslysis..

http://www.economicsdiscussion.net/foreign-exchange-rate-2/effects-of-depreciation-and-devaluation-of-the-exchange-rate/10855

The effect of a devaluation depends on:

1. Elasticity of demand for exports and imports. If demand is price inelastic, then a fall in the price of exports will lead to only a small rise in quantity. Therefore, the value of exports may actually fall. An improvement in the current account on the balance of payments depends upon the Marshall Lerner condition and the elasticity of demand for exports and imports

• If PEDx + PEDm > 1 then a devaluation will improve the current account
• The impact of a devaluation may take time to influence the economy. In the short term, demand may be inelastic, but over time demand may become more price elastic and have a bigger effect.

2. State of the global economy. If the global economy is in recession, then a devaluation may be insufficient to boost export demand. If growth is strong, then there will be a greater increase in demand. However, in a boom, a devaluation is likely to exacerbate inflation.

It´s so important to consider that when the global demand strengthened, such competitiveness-boosting measures resulted in a sustainable export growth and benefits for the respective economies.

That it does, we can see it from the eurozone and the good performance of the German economy vs. severe underperformance of Greece, Spain, Italy, Portugal...

Currency devaluation promotes exports?

As i said earlier, simple answer is yes. Exchange rate plays a focal role in determining country's competitiveness in the world economy. But you have to dig deeper to get the right answer. Is it working for a particular country or not.

Devaluation restrain imports and promotes exports. If Marshal-Learner conditions holds, then trade balance improve. But it also depends on country's structure of production, existing capacity, speed of adjustment.

What we need to increase exports, increase production which depends on availability of human capital and physical capital (or idol capacity to produce exportable surplus) .

Due to slow adjustment, despite increase in world demand for exports the country will be unable to meet demand. Therefore the effect of devaluation is positive or negative depends on elasticity ( output response to price). In addition in presence of restrictions such as quota, Country unable to reap the benefit. The effect of currency devaluation on exports also depends on world economy. If we do not take into account all, we may lead to wrong conclusion.

interesting

It depends on situation, because of economy needs to import raw materials, machinery and technology to increase exports the effects of devaluation are minimal, sometimes many countries they have borrowed.

Marshal-Lerner theory provides a necessary and sufficient condition for a currency devaluation to increase a country's competitiveness to promote export and improve on trade

The prices of the products that are exported become more competitive with a devaluation.

Currency depreciation will make domestic products relatively cheaper and foreign products dearer, i.e. exporters will gain a competitive edge although, as Yuri Yegorov and other peers pointed out, the impact might be limited.

In practice, the strategy of keeping the real exchange rate low has been adopted by several countries in their development process. An advantage of such policy is that it somehow relaxes constraints on the internal market (e.g. wage demands). On the other hand, a secondary effect of depreciation is the push on domestic inflation via import prices (increasing wage demands) and, ultimately, modifies income distribution to the disadvantage of fixed income earners.

In real world causality often goes the other way around, with inflation reducing price competitiveness of exports and pushing a country to devaluate. In turn, pegging the exchange rate has also been followed as a strategy to curbe domestic inflation and interest rates. The success and sustainability of such policies, however, strongly depends on "discipline" (i.e. keeping a deflationary stance at home).

Initially yes but after a while because of the J-curve effect the cost will outweigh the benefits. The J Curve is an economic theory which states that, under certain assumptions, a country's trade deficit will initially worsen after the depreciation of its currency—mainly because higher prices on imports will be greater than the reduced volume of imports.

In the past devaluation was a strategy to drive exports. However with Globalization the impact it has been reduced because of of growing communication and interdependence between the different countries of the world.