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How? By lowering wages? That's the tricky part. That's why devaluation is so much easier.
by afterburner 13y ago
How? By lowering wages? That's the tricky part. That's why devaluation is so much easier.
- jpatokal 13y agoTo implement, yes, but the impact is the same. Those devalued wages are now worth less when it comes to buying imports, and since (to a first approximation) everything in this globalized world of ours is imported, even local goods and services have to hike up prices in response.
- afterburner 13y agoSo you agree devaluation would be equally effective and easier.
- aigarius 13y agoThat's what Latvia did - 20% wage cut across the whole country, up to 40% wage cuts in some areas. Government sector lead the way and privates followed. Devaluation also destroys any savings that people might have AND makes the country less safe for the investors.
- afterburner 13y agoWage cuts make any debt you still have harder to pay off though. Devaluation makes exports more competitive, which will attract investment as sales increase.