Devaluation vs. Revaluation — What's the Difference?
Edited by Tayyaba Rehman — By Urooj Arif — Updated on March 19, 2024
Devaluation is the deliberate reduction in the value of a currency relative to another, while revaluation is the increase in currency value under similar conditions.
Difference Between Devaluation and Revaluation
Table of Contents
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Key Differences
Devaluation occurs when a government or monetary authority officially lowers the value of its national currency in relation to foreign currencies. This action can make a country's exports cheaper and more competitive internationally, potentially boosting the economy. On the other hand, revaluation involves the intentional increase in the value of a currency against others. It's often done to control inflation and stabilize the economy by making imports cheaper and reducing the cost of foreign goods and services.
The impact of devaluation is multifaceted; while it can enhance export competitiveness, it can also lead to increased import costs and potential inflation, as the price of foreign goods and services rises for domestic consumers. Conversely, revaluation can help keep inflation in check by making imports less expensive, but it may hurt the export sector by making its goods and services pricier on the international market.
Devaluation is often a response to economic challenges, such as trade imbalances or economic downturns, aiming to stimulate economic growth by making domestic goods more attractive abroad. In contrast, revaluation can be a sign of economic strength, reflecting a nation's robust export performance and potentially leading to a higher standard of living as imported goods become more affordable.
The decision to devalue or revalue a currency is influenced by various factors, including trade balances, inflation rates, economic growth, and the competitiveness of the national economy on the global stage. Such monetary policy moves are typically implemented by countries with a fixed or pegged exchange rate system, where the government directly controls the currency's value.
Both devaluation and revaluation have significant implications for international trade and investment flows. Devaluation can make a country more attractive to foreign investors seeking cheaper assets, whereas revaluation might deter investment by increasing the cost of assets and operations in the revaluing country.
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Comparison Chart
Definition
Reduction in currency value relative to others.
Increase in currency value relative to others.
Purpose
To boost exports and address trade deficits.
To control inflation and stabilize the economy.
Impact on Exports
Makes exports cheaper and more competitive.
Makes exports more expensive, potentially reducing demand.
Impact on Imports
Increases the cost of imports, leading to inflation.
Decreases the cost of imports, helping to control inflation.
Typical Context
Used in times of economic downturns or trade imbalances.
Often used in periods of economic strength and trade surpluses.
Compare with Definitions
Devaluation
Official reduction of currency value.
The devaluation of the currency aimed to boost the struggling export sector.
Revaluation
Official increase of currency value.
The central bank's revaluation of the currency was unexpected.
Devaluation
Adjusts international competitiveness.
The devaluation made the nation's goods more attractive on the global market.
Revaluation
Reflects economic strength.
The currency's revaluation was a sign of the country's robust economic health.
Devaluation
Strategy to improve trade balance.
Following devaluation, the country saw an increase in foreign demand for its products.
Revaluation
Tactic to combat inflation.
Revaluation made imported goods cheaper, helping to ease inflationary pressures.
Devaluation
Can lead to inflation.
Post-devaluation, the cost of imported goods rose sharply.
Revaluation
Common in surplus economies.
With a consistent trade surplus, the nation considered revaluation to stabilize the market.
Devaluation
Often used in fixed exchange rate systems.
The country's devaluation was a rare move under its pegged currency system.
Revaluation
Can affect the export industry.
The revaluation led to a decrease in foreign sales for local manufacturers.
Devaluation
In macroeconomics and modern monetary policy, a devaluation is an official lowering of the value of a country's currency within a fixed exchange-rate system, in which a monetary authority formally sets a lower exchange rate of the national currency in relation to a foreign reference currency or currency basket. The opposite of devaluation, a change in the exchange rate making the domestic currency more expensive, is called a revaluation.
Revaluation
Revaluation is a change in a price of a good or product, or especially of a currency, in which case it is specifically an official rise of the value of the currency in relation to a foreign currency in a fixed exchange rate system. In contrast, a devaluation is an official reduction in the value of the currency.
Devaluation
To lessen or cancel the value of.
Revaluation
To make a new valuation of.
Devaluation
To lower the exchange value of (a currency) by lowering its gold equivalency.
Revaluation
To increase the exchange value of (a nation's currency).
Devaluation
To lower the exchange value of a currency by lowering its gold equivalency.
Revaluation
The process of altering the relative value of a currency or other standard of exchange.
After the new party took power, the government declared a revaluation of the currency in an attempt to limit runaway inflation.
Devaluation
The removal or lessening of something's value.
Revaluation
A reassessment of the value or worth of something; a reappraisal or reevaluation.
After the soldiers raided her farm for supplies, she was forced to a revaluation of their benefit as protectors.
Devaluation
(economics) The intentional or deliberate lowering of a currency's value compared to another country's currency or a standard value (e.g. the price of gold).
Revaluation
The application of compound growth to the value of a pension benefit, specifically from the date of the member leaving the scheme (for example, moving to a different employer) to the date that the member starts receiving the benefit (typically retirement).
Devaluation
Depreciation.
Revaluation
A second or new valuation.
Devaluation
An official lowering of a nation's currency; a decrease in the value of a country's currency relative to that of foreign countries
Revaluation
A new appraisal or evaluation
Devaluation
The reduction of something's value or worth
Common Curiosities
Can devaluation lead to economic instability?
While it can stimulate export growth, excessive or poorly managed devaluation can lead to inflation and reduced consumer purchasing power, potentially destabilizing the economy.
How do exchange rate policies affect devaluation and revaluation?
Exchange rate policies play a crucial role; fixed or pegged rate systems allow for devaluation and revaluation, whereas floating rates adjust based on market forces without direct government intervention.
Is revaluation always beneficial for an economy?
Revaluation can have mixed effects; it benefits consumers by making imports cheaper but can harm exporters by making their goods pricier abroad.
Can devaluation improve a country's competitiveness?
Yes, by making exports cheaper, devaluation can enhance a country's competitiveness on the international stage, potentially increasing market share.
How does revaluation help control inflation?
Revaluation lowers the cost of imports, making foreign goods and services cheaper, which can help in controlling domestic inflation.
How does devaluation affect foreign debt?
Devaluation can increase the local currency cost of servicing foreign-denominated debt, making it more expensive for a country to pay back international loans.
How does revaluation affect the standard of living?
Revaluation can lead to a higher standard of living by making foreign goods and travel more affordable, but it might also impact domestic industries negatively.
Can a country frequently revalue or devalue its currency?
Frequent adjustments can lead to economic uncertainty and might undermine confidence in the currency, so they are typically undertaken cautiously.
How do fixed exchange rate systems facilitate devaluation and revaluation?
In fixed exchange rate systems, the government or central bank sets and maintains the currency's value, enabling deliberate adjustments like devaluation or revaluation.
What leads a country to devalue its currency?
Countries may devalue their currency to boost exports, address trade deficits, and stimulate economic growth during downturns.
What are the international reactions to currency revaluation?
Revaluation can lead to mixed international reactions; trading partners might benefit from cheaper imports, but global investors may find the country less attractive for investment.
How do devaluation and revaluation affect international trade agreements?
These monetary moves can affect trade agreements by altering the terms of trade, potentially leading to renegotiations or trade tensions.
What role do monetary authorities play in devaluation and revaluation?
Monetary authorities, such as central banks, play a crucial role in deciding and implementing devaluation or revaluation policies based on economic objectives.
What measures can mitigate the negative effects of devaluation?
Measures include monetary tightening to control inflation, fiscal policies to support affected sectors, and economic reforms to improve overall competitiveness.
Are there alternatives to devaluation for improving trade balances?
Alternatives include enhancing productivity, diversifying the economy, and improving product quality to make exports more attractive without altering currency value.
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Written by
Urooj ArifUrooj is a skilled content writer at Ask Difference, known for her exceptional ability to simplify complex topics into engaging and informative content. With a passion for research and a flair for clear, concise writing, she consistently delivers articles that resonate with our diverse audience.
Edited by
Tayyaba RehmanTayyaba Rehman is a distinguished writer, currently serving as a primary contributor to askdifference.com. As a researcher in semantics and etymology, Tayyaba's passion for the complexity of languages and their distinctions has found a perfect home on the platform. Tayyaba delves into the intricacies of language, distinguishing between commonly confused words and phrases, thereby providing clarity for readers worldwide.
