Question

through appreciation or revaluation of domestic currency convey the same thing i.e. rise in the value of domestic currency yet they are different in some respects. how?> what is their impact on exports of the country

Answer 1

Hey Riya,

Revaluation or Appreciation of domestic currency is an increase in the value of the domestic currency in terms of the foreign currency. This means that the domestic currency has become more expensive in terms of the foreign currency. But these concepts are different in some respects as revaluation of currency takes place under Fixed Exchange Rate System, whereas, appreciation takes place under Flexible Exchange Rate System.

Currency appreciation implies that domestic currency has become more expensive in terms of foreign currency. For instance, if the exchange rate falls from $1 = Rs 50 to $1 = Rs 48 then we say that rupee has appreciated against the dollar. In such a situation the domestic country's export to foreign countries have become expensive (because now foreigners ca purchase only Rs 48 worth of goods instead of Rs 50 worth of goods). This reduces the demand for exports.

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