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1994•Economia Internazionale / International EconomicsRequires access

Currency Devaluation and Growth

Gladson I. Nwanna

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Abstract

This study examines the effects of devaluation on output growth in Low Income Economies (LIEs). The study includes that devaluation docs have a negative effect on output growth in not only in the short-run, but also in the long run. The study points out why devaluation, as a stabilization tool or as a strategy for economic growth, as it is presently recommended and administered, may not be suitable for LIEs. It points out further, why devaluation in LIEs may fail to generate the responses and benefits usually expected from the process, and some reasons why devaluation may instead worsen the economic conditions of these countries. In conclusion, the study questions the indiscriminate prescription of devaluation and related structural adjustment policies f or LIDO»; a some how blanket prescription that havoc hardly proved. to be optimal or beneficial to most LIDO».

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What this paper is about

This study examines the effects of devaluation on output growth in Low Income Economies (LIEs). The study includes that devaluation docs have a negative effect on output growth in not only in the short-run, but also in the long run. The study points out why devaluation, as a stabilization tool or as a strategy for economic growth, as it is presently recommended and administered, may not be suitable for LIEs. It points out further, why devaluation in LIEs may fail to generate the responses and benefits usually expected from the process, and some reasons why devaluation may instead worsen the economic conditions of these countries. In conclusion, the study questions the indiscriminate prescription of devaluation and related structural adjustment policies f or LIDO»; a some how blanket prescription that havoc hardly proved. to be optimal or beneficial to most LIDO».

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Available abstract

This study examines the effects of devaluation on output growth in Low Income Economies (LIEs). The study includes that devaluation docs have a negative effect on output growth in not only in the short-run, but also in the long run. The study points out why devaluation, as a stabilization tool or as a strategy for economic growth, as it is presently recommended and administered, may not be suitable for LIEs. It points out further, why devaluation in LIEs may fail to generate the responses and benefits usually expected from the process, and some reasons why devaluation may instead worsen the economic conditions of these countries. In conclusion, the study questions the indiscriminate prescription of devaluation and related structural adjustment policies f or LIDO»; a some how blanket prescription that havoc hardly proved. to be optimal or beneficial to most LIDO».

Key concepts: Devaluation, Economics, Currency, Monetary economics, International economics, Macroeconomics

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