The Devaluation Dilemma

Jerry Haar To devalue or not to devalue? That is the question. During the last decade, Latin American central banks have effectively steered the rudder of monetary policy, avoiding major devaluations of their currencies–with the exceptions of Argentina and Venezuela. Recognizably, there have been incremental devaluations in the region as a country may devalue its currency to combat trade imbalances. Chile and Peru are examples. Resultingly, a nation’s exports become less expensive and, therefore, more competitive in global markets; imports become more expensive, making domestic consumers less likely to purchase them. While currency devaluation may appear to be a wise economic policy choice, it can surely have negative consequences. The result of imports becoming more expensive has the effect of […]