After the First World War, a new era of economic development began. The most important distinguishing characteristic of this stage was the change of the gold standard, which has been in power for a long time, with a system based on paper banknotes. Thanks to the measures taken, the state received an excellent opportunity to increase the budget expenditure item due to deficit financing. This, in turn, negatively affected the immediate cost of money. In the domestic market, the depreciation of the currency affected the purchasing power of the population. On the external national currency has reduced its value in relation to the money of other countries. In economics, such a process is called devaluation. People who lived in the USSR and in the CIS countries formed after its collapse — the Russian Federation, Ukraine, the Republic of Belarus, and others) are well acquainted with him.
In the global and national economies, there is also such a process as revaluation. This is the opposite term devaluation. It will be discussed in this article.
Etymology of the concept under consideration
Revaluation is a term that has been borrowed from the Latin language. If we consider the concept from a morphological point of view, we can distinguish two components: the prefix "re" and the base "valeo". The first part in the translation means "increase, increase." The second is “to matter, to be valuable.” If you put together parts of a word, you get the following: an increase in value.
Gradually, this term began to be used in economics. To date, revaluation is a process of increasing the value / exchange rate of a currency of a country in relation to the currencies of other states or international currency units.
The first scope. International level
In this case, the revaluation of the national currency is a term generally accepted and familiar to many countries, which means the growth of the value of means of payment within the state in relation to international monetary units and the currencies of other countries.
As a rule, this process in many cases becomes one of the methods of economic recovery after inflation. Moreover, in such a situation, it becomes possible to acquire cheaper funds of any state. This has a positive effect on the business of importing goods and products, as well as on the work of capital importers. On the other hand, currency revaluation is a probable and almost inevitable loss of profit / customers for enterprises whose main business is exporting goods abroad.
The second scope. National level
In the structure of the monetary system of an individual country at the domestic level, this process can also take place. For example, the government wants to know what the total amount of the gold and foreign exchange reserve of the state, which is on the balance sheet of the Central Bank, in terms of the national currency. This issue is followed by a revaluation of all cash. This process has a specific name - "revaluation". This action is carried out with a certain periodicity or depending on financial factors (crisis, war, etc.).
The third scope. Industry level
At the micro level it is also possible to use the term in question. For example, when evaluating the property that makes up an asset of an organization. In this case, revaluation is a revaluation of the entire balance sheet to account for the effects of inflation. First of all, fixed assets, capital and various reserves are taken into account here.
Negative points
As a rule, a country that wants to stabilize its economy by revaluation puts itself in a dual position. On the one hand, this process will strengthen the national currency. This is the most important positive point. On the other hand, a number of negative factors influence the decision of the government:
1. A decrease in investment in the national economy from abroad.
2. Unsuitable conditions for attracting tourists and developing the tourism sector.
3. Currency revaluation also means a falling demand for national goods in the foreign market.
It is because of these rather large disadvantages that this process is much rarer. Only financially strong countries allow themselves to carry out a revaluation. These include Germany, Japan, Switzerland. Once in the XIX century, the United States and Great Britain also used revaluation to stabilize the state of their economy.
Investment outflow
As noted above, the method under consideration is used as a means of combating inflation. In standard situations, revaluation becomes the only solution when there is an urgent need to import goods (since national goods become uncompetitive for export due to their high cost) or capital export.
If the government decided to carry out this process in the context of the economic crisis, it should be prepared for a decline in the level of foreign entrepreneurial interest. As a rule, foreign companies are not too interested in investing at an unfavorable exchange rate for them. And the latter is automatically set as a consequence of the revaluation process. Moreover, in the domestic market, the drop in the level of national monetary funds may not stop. In the Russian economy, ruble revaluation is a method that is not necessary to resort to due to the lack of high inflation. In addition, a huge number of enterprises with foreign capital carry out their activities in the country. Therefore, revaluation will lead to a decrease in investment and a new round of weakening economic conditions.