revaluation

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Revaluation

An increase in the foreign exchange value of a currency that is pegged to other currencies or gold.

Revaluation

A change to the exchange rate of a pegged currency. For example, if the central bank has declared a currency to be worth 10 U.S. dollars and later changes the exchange rate to $8, one refers to this as a revaluation. A revaluation generally, but does not always, refer to an increase in value.

revaluation

  1. the increase in the valuation of a FIXED ASSET to its current market value. Revaluation of fixed assets such as land and buildings may be necessary to reflect their APPRECIATION as property prices rise. Where revaluation takes place, the increase in the value of the fixed asset over its NET BOOK VALUE is added to the company's RESERVES.
  2. an administered increase in the EXCHANGE RATE of a currency against other currencies under a FIXED EXCHANGE RATE SYSTEM; for example, an increase in the value of the UK pound (£) against the US dollar ($) from one fixed or ‘pegged’ level to a higher level, say, from £1 = $2 to £1 = $3. Governments resort to revaluations as a means of eliminating a BALANCE OF PAYMENTS surplus. The effect of a revaluation is to make imports (in the local currency) cheaper, thereby inducing an increase in import demand, and exports (in the local currency) more expensive, thereby reducing export demand. Contrast DEVALUATION.
Revaluationclick for a larger image
Fig. 171 Revaluation. A revaluation of the pound against the dollar.

revaluation

an administered increase in the value of one CURRENCY against other currencies under a FIXED EXCHANGE-RATE SYSTEM, for example, as in Fig. 171, an increase in the value of the UK pound against the US dollar from one fixed value to another higher value, say, from £1 = $2.40 to £1 = $2.80. The objectives of a revaluation are to assist in the removal of a surplus in a country's BALANCE OF PAYMENTS and the excessive accumulation of INTERNATIONAL RESERVES. A revaluation makes IMPORTS (in the local currency) cheaper and EXPORTS (in the local currency) more expensive, thereby encouraging additional imports and lowering export demand.

How successful a revaluation is in removing a payments surplus depends on the reactions of export and import volumes to the change in relative prices, that is, the PRICE-ELASTICITY OF DEMAND for exports and imports. If these values are low, that is, demand is inelastic, trade volumes will not change very much, and the revaluation may in fact make the surplus larger. On the other hand, if export and import demand is elastic, then the change in trade volumes will operate to remove the surplus. BALANCE-OF-PAYMENTS EQUILIBRIUM will be restored if the sum of export and import elasticities is greater than unity (the MARSHALL-LERNER CONDITION).

Also, whether or not a revaluation ‘works’ in restoring balance-of-payments equilibrium depends on a number of factors, including the reaction of domestic firms and the effect of the government's other policies over the longer term (for example, the control of inflation). For business, a revaluation makes imports more price-competitive, putting pressure on domestic producers either to cut their prices or, alternatively, depend more on advertising and sales promotion. Likewise, in export markets, a firm may choose to hold its prices, accepting lower profit margins rather than increase them in order to maintain market share. Thus, in the short run, revaluations threaten firms’ current profitability and market position, putting firms under pressure to cut costs by improving productivity and generally placing a greater emphasis on PRODUCT DIFFERENTIATION as a means of remaining competitive against overseas suppliers. Contrast DEVALUATION.

See EXTERNAL-INTERNAL BALANCE MODEL.

References in periodicals archive ?
Whilst some of the thirty proposals will rightly be subject to further scrutiny, we hope the key recommendations - increasing the frequency of revaluations and matching the English tax rate on higher Rateable Values - will be implemented swiftly by the Scottish Government.
Despite the property revaluation, IPT paid for 2015 and 2016 was still based on the market value of properties as at 1st of January 1980.
THE Welsh Government has announced a PS10m relief fund to help small businesses affected by a rise in business rates after the latest revaluation.
Sara Jones, head of policy and External Affairs at the Welsh Retail Consortium, said: "The real issue facing retailers will be once the revaluation of properties takes effect from 1 April 2017.
Rates generally make up a bigger part of retailers' occupier costs than rent JOHN ADGEY ON RATES REVALUATION IMPLICATIONS
The next section provides a brief background on the accounting for asset revaluations in respect to IFRS and discusses the existing literature.
If the revaluation had not been postponed then our client would have expected a welcome adjustment to their tax base from April 2015 and beyond.
In the authors' opinion, it is both possible and appropriate for FASB to expand fair value accounting to permit the upward revaluation of long-lived PP&E, perhaps limiting revaluations to assets with economic lives that extend beyond 10 years.
Prior to making this request, the Local Government Minister was already clear that he did not wish to hold a revaluation in Wales but was unable to come to a final decision on this because the powers were not devolved.
In short, this change raises another question over the value of the pre-2008 data being used in the revaluation, and further demonstrates the need for the VO to monitor the situation and fine tune its findings.
If the RMB revaluation slows China' s exports, Korean companies' exports to China, which have recently surged, would be influenced.
expects its Chinese operations to remain competitive as long as the revaluation is no sharper than 10 percent.