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    Inflation, devaluation and competitiveness

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    Countries with high inflation need to keep devaluing their currencies to maintain competitiveness. But countries that try to maintain their competitiveness by devaluing their currencies only end up with even higher inflation. Discuss.

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    Devaluation improves competitiveness to the extent that it does not cause higher inflation. If the devaluation causes domestic wages and prices to rise, any gain in competitiveness is immediately eroded. To address the competitive consequences of devaluation, therefore, two possible cases must be ...

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