The Question is Not Whether “To Devalue or Not to Devalue?” But Rather “What to Devalue?” | UHY Dawgen Chartered Accountants Blog

The Question is Not Whether “To Devalue or Not to Devalue?” But Rather “What to Devalue?” | UHY Dawgen Chartered Accountants Blog:

Low economic growth, a key concern of policymakers in the Caribbean, could be due to
inadequate competitiveness. In this policy brief, we review the problem of a lack of
competitiveness and the policy options to improve competitiveness and hence promote economic
growth.
A sustained current account deficit of the balance of payments is prima facie evidence of
a lack of competitiveness. We discuss three devaluation policy options to improve
competitiveness: an external devaluation, an internal devaluation, and a fiscal devaluation.
These options aim to increase exports relative to imports and thus stimulate economic growth.
Competitiveness
An indirect measure of competitiveness is the current account of the balance of payments. A
current account deficit holds when a country’s (a) imports of goods and services exceed its
exports of goods and services; (b) domestic consumption and investment exceed its production;
and (c) domestic aggregate savings are less than domestic aggregate investment.

In economic vernacular, a current account deficit holds when a country is “living beyond its means.”
The Caribbean suffers from an increasing current account deficit relative to the rest of
small economies (ROSE)—classified as countries with a population of fewer than 3 million
people, a metric that is used as a comparator for the Caribbean. Detail Report

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