Devaluation and revaluation
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Devaluation refers to a reduction in the value of a domestic currency implemented by a government under a fixed exchange rate system. Revaluation is an increase in the value of a domestic currency also set by a government. Depreciation differs in that it is a fall in the market price of a domestic currency relative to a foreign currency led by market forces like supply and demand, occurring under a flexible exchange rate system not directly influenced by government policy.
Devaluation and revaluation
- 2. Devaluation and Revaluation: Devaluation refers to reduction in the value of domestic currency by the government. On the other hand, Revaluation refers to increase in the value of domestic currency by the government.
- 3. Devaluation Vs. Depreciation: Basis Devaluation Depreciation Meaning: Devaluation refers to reduction in price of domestic currency in terms of all foreign currencies under fixed exchange rate regime. Depreciation refers to fall in market price of domestic currency in terms of a foreign currency under flexible exchange rate regime. Occurrence: It takes place due to Government. It takes place due to market forces of demand and supply. Exchange Rate System: It takes place under fixed exchange rate system. It takes place under flexible exchange rate system.