Competitive Devaluation

Competitive devaluation occurs when countries intentionally lower the value of their currencies to make their exports cheaper and more attractive globally. This strategy aims to boost domestic industries by increasing export sales while making imports more expensive, encouraging consumers to buy locally. However, if multiple countries engage in devaluation simultaneously, it can lead to a "race to the bottom," causing currency instability, inflation, and reduced international trust. While it may provide short-term economic advantages, widespread devaluation can harm global economic stability and lead to retaliatory measures.