There are many advantages and disadvantages as well. Devaluation discourage the inflow of goods and services. As the importer in the devaluing currency have to pay more to the foreigners for a given quantity of imports they therefore shrink order. Devaluation has a very harmful effect on the economy of a developing country, if its exports have elastic ad its imports in-elastic demand. A developing country has to import a large number of strategic factors of production which are not available in the country for accelerating the rate of economic development.
The devaluing country cannot pay for all its costly imports and so it has to rely on foreign debts which have its own evil effects. The country can benefit from devaluation if the demands for its products are fairly inelastic. It can increase supply in response to a higher demand without increasing the price of the exported goods. The country then will be in a position to pay for the costly imports. The economic progress will not be adversely affected.
If due to devaluation exports of goods and services are increased and imports reduced the country will have a favourable balance of payment. If the devaluing country's exports of goods and services increase it will stimulate domestic employment.
The devaluing country cannot pay for all its costly imports and so it has to rely on foreign debts which have its own evil effects. The country can benefit from devaluation if the demands for its products are fairly inelastic. It can increase supply in response to a higher demand without increasing the price of the exported goods. The country then will be in a position to pay for the costly imports. The economic progress will not be adversely affected.
If due to devaluation exports of goods and services are increased and imports reduced the country will have a favourable balance of payment. If the devaluing country's exports of goods and services increase it will stimulate domestic employment.
