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.

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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.