Devaluation is the deliberate downward adjustment of a country’s currency value.
The government issuing the currency decides to devalue a currency. Devaluing a currency reduces the cost of a country’s exports and can help shrink trade deficits.
Currency devaluation may lower productivity, since imports of capital equipment and machinery may become too expensive.
Devaluation also significantly reduces the overseas purchasing power of a nation’s citizens.
In this video, Ray Dalio talks about his first experience of currency devaluation. It happened in 1971, when he studied at Harvard Business School.
As a clerk working in The New York Stock Exchange, Dalio observed the strong effects and did thorough research.
Source: Finance Jane.
