The Question is Not Whether "To Devalue or Not to Devalue?" But Rather "What to Devalue?"
In this policy brief, we review the problem of a lack of competitiveness and the policy options to improve competitiveness and hence promote economic growth. Inadequate competitiveness can be measured as a sustained current account deficit of the balance of payments. We discuss the advantages and disadvantages of three devaluation policy options: an external devaluation, an internal devaluation, and a fiscal devaluation. We conclude that the latest fashionable option, fiscal devaluation, offers gain with no pain but detailed country-specific simulations are needed to determine which option is the better one.
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| Format: | Policy Briefs biblioteca |
| Language: | English |
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Inter-American Development Bank
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| Subjects: | Monetary Policy, Investment, E62 - Fiscal Policy, F32 - Current Account Adjustment • Short-Term Capital Movements, |
| Online Access: | http://dx.doi.org/10.18235/0008431 https://publications.iadb.org/en/question-not-whether-devalue-or-not-devalue-rather-what-devalue |
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| Summary: | In this policy brief, we review the problem of a lack of competitiveness and the policy options to improve competitiveness and hence promote economic growth. Inadequate competitiveness can be measured as a sustained current account deficit of the balance of payments. We discuss the advantages and disadvantages of three devaluation policy options: an external devaluation, an internal devaluation, and a fiscal devaluation. We conclude that the latest fashionable option, fiscal devaluation, offers gain with no pain but detailed country-specific simulations are needed to determine which option is the better one. |
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