Influence of Currency Devaluation on Import

Devaluation of Currency Your name Institution Name Date Devaluation of Currency In the contemporary era, countries are largely involved in managing the trade balance between imports and exports to boost economic growth. As per the study by Blaum (2017), it determines that currency devaluation and contraction in aggregate productivity significantly influence the economic crises in developing markets. The paper highlights the case of China’s international firms to determine the effect of weak currency due to devaluation in the economic market. Currency Devaluation Currency devaluation is the strategic monetary policy to reduce the value of the currency for trade balance in case of trade deficits. It reduces imports and encourages exports to be competitive in the trade market. Hence, the respective changes directly incline the inflation rate and unemployment in the domestic market, which has benefits in the long-run but has side effects in short-run trading (Okaro, 2017). Thus, currency devaluation proves competitive to improve the demand for its export in China. Influence of Currency Devaluation on Import The currency devaluation has a drastic impact on the national trading system. Correspondingly, it becomes the charm for international companies to enhance the export due to lower prices of commodities, whereas it ridiculously drops the import because of high inflation. Weak currency opens up the opportunities for local distributors to export their products and services in foreign markets, but it depends on technological capacity; physical capacity and magnitude of currency exchange. Moreover, the duration of devaluation highly matters in encouraging the demand for export. Initially, currency depreciation increases the demand of local brands in an international market, but with time, it drops due to monetary instability of a country like happened in China’s case (Moreira, Pierola & Sánchez-Navarro, 2017). Thereby, currency devaluation dramatically influences the trade balance of a country by varying the condition of export and import. Real Examples of ...