Difference Between Appreciation and Depreciation of a Nation's Currency

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Economics Essay Explain the difference between appreciation and depreciation of a nation's currency. Over the last several years, the issue of currency depreciation has been increasingly brought to the forefront. This is because the exchange rates of a country's currency will have an impact on economic growth going forward. As a result, the different currencies will float against each other on the world markets. This will cause the value to fluctuate depending upon a number of factors including: possible inflation / deflation, the underlying levels of growth and the overall amounts of trade. The combination of these elements will cause a nation's currency to appreciate or weaken depending upon specific events. (Cappozi, 2012) When the currency is appreciating, this is a sign that there are lower amounts of money being released into the economy from the central bank. This is designed to help improve the sale of certain products and services in overseas markets. However, if the currency continues to appreciate for too long it will create a situation where a nation's manufacturers will be unable to compete in select countries. Moreover, the nation will experience some kind of trade deficit (which will have an impact on the national debt). Over the course of time, this can weaken a country's manufacturing base and it will make them a debtor nation to their trading partners. (Cappozi, 2012) However, during times when the currency is depreciating, the central bank is
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