Explain why a currency depreciation can improve a nation's balance of trade.?
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This entry was posted on Tuesday, May 26th, 2009 at 8:08 am and is filed under Currency Trading. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
May 26th, 2009 at 8:08 am
Well balance of trade is exports minus imports(for basic purposes we can assume this).
So if the value of a nations dollar goes down that means that other currencies can buy stuff denominated in the deprecated currency cheaper. So more people will buy their good.
This improves the nations exports. So if we hold imports constant… the balance of trade improves.