The paper is devoted to the study of theoretical and practical aspects of determinant management of competitive devaluation, which are the essence of competitive devaluation, instruments of its implementation, as well as the positive and negative consequences of its impact on the economy of the country, which is implementing it and its trading partners. The authors have found that competitive devaluation is a deliberate devaluation of currency initiated (both officially and informally) by the central bank to reduce the value of exported goods, thereby facilitating domestic production, solving the unemployment problem, and reducing the balance of payments deficit.
The article determines that the most significant impact of competitive devaluation takes place in the following sectors of the country’s economy: foreign trade, industrial, agricultural, financial and services. The study has found that the degree of effectiveness of competitive devaluation to stimulate economic growth of a country is determined by the following factors: structure of foreign trade, share of imported raw materials and components in the cost of goods, foreign trade barriers, growth rates of other countries’ economies, elasticity of demand for exported goods, use of fixed commodity contracts and risk hedging instruments, J-curve effect.
The authors highlight the positive and negative consequences of competitive devaluation for the country implementing it and its trading partners. Expected positive results for the country which is devaluing its currency is an increase in exports and an increase in domestic demand, which should contribute to higher employment and economic growth. Among the negative effects of competitive devaluation are the following: a decrease of the purchasing power of the population, a rise of prices of imports and a decrease of their volumes, an increase of the inflation rate; more expensive repayment of foreign currency denominated debt; reduction of foreign investments; restriction of scientific and technological development and the outflow of professional labor.