Beggar-thy-neighbor devaluation

Beggar-thy-neighbor devaluation

A devaluation that is designed to cheapen a nation's currency and thereby increase its exports at the expense of other countries. Devaluation can also reduce a nation's imports. Such devaluations often lead to trade wars.

Beggar-Thy-Neighbor

A protectionist policy involving the devaluation of one's currency and the construction of tariffs barriers on other countries. The goal of a beggar-thy-neighbor policy is to increase demand for a country's exports (by devaluing the currency and making a country's goods less expensive in other countries) while also reducing demand for the countries imports (by making them more expensive through the tariff barriers). A form of this policy, notably the tariff barrier, was implemented at the beginning of the Great Depression with almost no success. A beggar-thy-neighbor policy in the United States caused other countries to follow suit, resulting in a massive decrease in international trade. This made the Depression worse. See also: Smoot-Hawley Act.
References in periodicals archive ?
In 1998, during the Asian financial crisis, instead of engaging in beggar-thy-neighbor devaluations and financial protectionism, countries found common ground to guard against future crises.
Indeed, as the world goes into a severe economic downturn, the threat of beggar-thy-neighbor devaluations becomes acute--as in the 1930s.
The perceived ills to be avoided included: 1) floating exchange rates condemned in the early 1920s as prone to destabilizing speculation; 2) the subsequent gold exchange standard marred in the early 1930s by problems of adjustment, liquidity, and confidence that enforced the international transmission of deflation; and 3) after 1933, the beggar-thy-neighbor devaluations, trade restrictions, exchange controls, and bilateralism.