why developing countries often devalue their currency??
Answers
Answer: IN Simple Terms ,
A country may devalue their currency when they want to boost exports, and work force participation, as their currency is now low, its cheaper for foreign investors to do business with that country and/or to buy exports assuming regulations, red tape and export fees are not changed.
Explanation:
It may seem counter-intuitive, but a strong currency is not necessarily in a nation's best interests. A weak domestic currency makes a nation's exports more competitive in global markets, and simultaneously makes imports more expensive. Higher export volumes spur economic growth, while pricey imports also have a similar effect because consumers opt for local alternatives to imported products. This improvement in the terms of trade generally translates into a lower current account deficit (or a greater current account surplus), higher employment, and faster GDP growth. The simulative monetary policies that usually result in a weak currency also have a positive impact on the nation's capital and housing markets, which in turn boosts domestic consumption through the wealth effect.