Currency Depreciation
We discuss the currency depreciation vs. devaluation. Also, discuss the impact of currency depreciation from Indian economy perspective.
Currency Depreciation & Impact
Rajesh Kanjani (34473) rajesh.kanjani@hotmail.com SIBM Exe. MBA (2011-2014)
Currency Devaluation vs. Depreciation
The devaluation and deprecation of currency go more or less hand in hand. Currency depreciation is an economic result, whereas devaluing a currency is an act that results in currency depreciation. Many a times they are technically used interchangeably.
Depreciation of Currency * When a currency depreciates, this means that the currency has decreased in value when compared to another nation’s currency.
Devaluation of Currency * Devaluation of currency is an active economic strategy. It is sometimes used when countries are badly in debt. This occurs when a country lowers the official value of its currency in relation to foreign currencies. This is intended to raise the price of imported goods and increase the value of the country's exported goods. This can be a risky economic move because it can spark hyperinflation.
Both of these concepts involve international economics and foreign exchange trading. Devaluation is a result of natural changes within the world economy. Devaluation can occur because of several different circumstances. These circumstances also might not necessarily be the fault of the country whose currency was devalued. Other countries' currencies can get stronger which results in a devaluing domestic currency. Currency depreciation is an active economic move with the desired result being devaluation of currency on the foreign exchange market.
Relating Devaluation & Depreciation to Currency Regime * In a "freely" and "managed" floating currency regime, a loss in currency value is conventionally called "depreciation", whereas an increase of currency's international value will be called "appreciation". If the dollar rises from 10,000 yen to 12,000 yen,
Currency Depreciation & Impact
Rajesh Kanjani (34473) rajesh.kanjani@hotmail.com SIBM Exe. MBA (2011-2014)
Currency Devaluation vs. Depreciation
The devaluation and deprecation of currency go more or less hand in hand. Currency depreciation is an economic result, whereas devaluing a currency is an act that results in currency depreciation. Many a times they are technically used interchangeably.
Depreciation of Currency * When a currency depreciates, this means that the currency has decreased in value when compared to another nation’s currency.
Devaluation of Currency * Devaluation of currency is an active economic strategy. It is sometimes used when countries are badly in debt. This occurs when a country lowers the official value of its currency in relation to foreign currencies. This is intended to raise the price of imported goods and increase the value of the country's exported goods. This can be a risky economic move because it can spark hyperinflation.
Both of these concepts involve international economics and foreign exchange trading. Devaluation is a result of natural changes within the world economy. Devaluation can occur because of several different circumstances. These circumstances also might not necessarily be the fault of the country whose currency was devalued. Other countries' currencies can get stronger which results in a devaluing domestic currency. Currency depreciation is an active economic move with the desired result being devaluation of currency on the foreign exchange market.
Relating Devaluation & Depreciation to Currency Regime * In a "freely" and "managed" floating currency regime, a loss in currency value is conventionally called "depreciation", whereas an increase of currency's international value will be called "appreciation". If the dollar rises from 10,000 yen to 12,000 yen,
References: http://www.careratings.com http://en.wikipedia.org http://www.youtube.com http://www.economictimes.com