Revaluation is a method to combat the effects of inflation

After the First World War, a new era of economic development began. The most important characteristic of this stage was the change of the golden standard ruling for a long time, a system based on paper notes. Thanks to the measures taken, the state received an excellent opportunity to increase the budget item due to deficit financing. This, in turn, negatively affected the immediate value of money. In the domestic market, currency depreciation affected the purchasing power of the population. On the external, the national currency has reduced its value relative to the money of other countries. In the economy, this process is called devaluation. People who lived on the territory of the USSR and in the countries of the CIS formed after its disintegration - the Russian Federation, Ukraine, the Republic of Belarus and others - are well acquainted with him.

In the world and national economies, there is also such a process as revaluation. This is the opposite of the devaluation term. About him and will be discussed in this article.

The etymology of the concept in question

Revaluation is a term that was 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 have value, to be valuable." If you put together parts of the word, you get the following: increase in value.

Gradually this term began to be used in the economy. To date, revaluation is the process of increasing the value / exchange rate of a currency of one or another country in relation to the currencies of other states or to international monetary units.

The first sphere of application. International level

In this case, the revaluation of the national currency is a generally accepted term familiar to many countries, indicating the growth of the value of payment means within the state in relation to the international monetary and monetary units and currencies of other countries.

As a rule, this process in many cases becomes one of the methods of economic recovery after inflation. At the same time, in such a situation, it becomes possible to purchase money from any state cheaper. This positively affects the business of importing goods and products, as well as the work of capital importers. On the other hand, currency revaluation is a probable and practically inevitable loss of profit / customers for enterprises, the basis of which is export of goods abroad.

The second sphere of application. National level

In the structure of the monetary system of a particular 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 currency reserve of the state, which is on the balance sheet of the Central Bank, is recalculated to the national currency rate. This issue is followed by a reassessment of all cash. This process has a certain name - "revaluation". This action is carried out with a certain periodicity or depending on financial factors (crisis, war, etc.).

The third sphere of application. Industry level

At the micro level, it is also possible to use the term in question. For example, in assessing the property that constitutes the asset of the 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 moments

As a rule, a country that wants to stabilize its economy by the method of revaluation puts itself in a dual position. On the one hand, this process will strengthen the national currency. This is the most important positive moment. On the other hand, the government's decision is influenced by a number of negative factors:

1. Decrease in the volume of investments in the national economy from abroad.
2. Unsuitable conditions for attracting tourists and developing tourism.
3. Revaluation of currency also means a falling demand for national goods in the foreign market.

It is because of these rather large minuses that this process is very rare. To conduct revaluation allow themselves only strong in the financial situation of the country. These include Germany, Japan, Switzerland. Once in the XIX century to stabilize the state of its economy, the United States and Great Britain also used revaluation.

Outflow of investments

As noted above, this method is used as a means of combating inflation. In standard situations, revaluation becomes the only solution for the urgent need to import goods (as national goods become uncompetitive for exports because of their high cost) or export of capital.

If the government has decided to implement this process in the midst of an economic crisis, it must be prepared to decline the level of foreign entrepreneurial interest. As a rule, foreign companies are not too interested in investing at an unprofitable exchange rate. And the latter is automatically set as a consequence of the revaluation process. At the same time, in the domestic market, the drop in the level of the national money may not stop. Under the conditions of the Russian economy, the ruble's revaluation is a method that there is no need to resort to because of the lack of a high level of inflation. Moreover, a huge number of enterprises with foreign capital carry out their activities on the territory of the country. Therefore, revaluation will lead to a reduction in investment and a new round of weakening the state of the economy.