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ar by its currency board, and that it wanted to avoid another series of previous hyperinflation. Moreover, when the economy went into recession, it became economically costly and politically difficult to pursue tight macroeconomic policy. What happened in reality is that speculators attacked the Argentinian peso anyways. Their main suspicion was that Argentina would abandon the currency board to reduce the unemployment rate. Under the currency board system, the crisis in the banking system started with the outflow of capital and a quick decline in the monetary base. The government continued to require for increased IMF funding and hope that the US dollar will depreciate and that commodity prices would go up. The whole crisis that Argentina went through made devaluation inevitable, after all.

 

The Asian Crisis

 

In the mid-1990s in some Asian countries, especially in Thailand, devaluation was discouraged because of the effect it might have on its balance sheets, although their current account deficit rose. Because of high interest rates and the perception that the government would not allow for large devaluation, a considerable amount of foreign borrowing ended up un-hedged. Weaknesses in the financial sector grew and officials feared that devaluation would mean high costs on the domestic economy. Given the political system in Thailand, where there is a large number of veto players, the tendency to delay devaluation was constantly increasing. As a result, the country ended up in constant delay until all of its international reserves were exhausted. As part of the strategy of the Bank of Thailand to delay devaluation was the protection of the measured reserves by sales in the forward market. Given that announced reserves were about US$ 30 billion, useable reserves net of forward sales fell to only a few billion before the baht was devalued .

 

Conclusion

 

From the above facts presented throughout this paper, we consider the effects of devaluation to be complex and influential simultaneously. Theoretically, the weaker the currency means the lower the prices of exported products will become, relative to prices in other countries. The opposite holds true for imported goods. The weaker the home currency the higher will be the relative prices of imports from the outside world. Furthermore, for export oriented sectors of countries that have devalued their currency, advantages are present in the cost of labor and materials, fostering even further their competitive position abroad. In the most simplified manner, these arguments seem perfectly valid; however, there are negative consequences as well.

 

Governments often hesitate to take devaluation measures also in cases when the general opinion is that the exchange rate is overvalued. Because it is important to maintain the equilibrium of exchange rates, why, after having considered all indicators, governments tend to disregard adjustments. Economic analysis cannot provide a good本论文由英语论文网提供整理，提供论文代写，英语论文代写，代写论文，代写英语论文，代写留学生论文，代写英文论文，留学生论文代写相关核心关键词搜索。