11.2.3—Revaluation vs devaluation

A revaluation is an official increase in the value of a currency under a fixed or managed regime; a devaluation is an official decrease. They differ from appreciation and depreciation, which usually describe market movements.

Revaluation makes imports cheaper and exports less competitive; devaluation tends to reverse those effects, subject to elasticities, imported inputs, debt currency and policy credibility.

If a government changes a peg from 1 unit = $1.20 to$1.30, the currency has been revalued under that quotation; changing it to $1.10 is a devaluation.

Do not use appreciation/depreciation for an announced parity change without noting the regime, and do not assume devaluation automatically improves the trade balance.