Competitive devaluation

Definition

Competitive devaluation is a policy pursued by countries to deliberately lower the value of their national currency to boost exports by making them cheaper on the global market. This strategy can lead to a 'race to the bottom' as multiple countries attempt to undercut each other's export prices.

Related terms

Currency War: An economic conflict where countries compete against each other to achieve a relatively low exchange rate for their own currency to improve trade balance.

Trade Balance: The difference between a country's imports and exports, where a positive balance means a country exports more than it imports.

Exchange Rate: The value of one currency for the purpose of conversion to another, which plays a crucial role in international trade competitiveness