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> Instead, their exporters have problems with competitiveness which take many years to equilibrate (they must have lower inflation or deflation relative to Germ
by Double_a_92 7y ago
> Instead, their exporters have problems with competitiveness which take many years to equilibrate (they must have lower inflation or deflation relative to Germany).
Then why don't they lower their prices? Why do they need to rely on a devaluating currency (which might come automatically from the market, or from the central bank actively buying foreign currency at high price)?
- bainsfather 7y agoSo, you need to lower all prices - i.e. as an exporter you ask your workers to take wage cuts, they must ask their landlords to reduce their rents, shopkeepers to reduce prices etc. This is a slow process (especially because many contracts run for a fixed period so cannot be changed until the next contract is signed). Internal devaluation can be done, it is just a slow and painful process (usually including higher unemployment).