An Evaluation of Currency Deprecation and its Impact on the Economy: A Conceptual Study

For any country, value of its currency is considered as one of the major indicators of its economy. In the current global economic scenario where presence of several events plays vital roles in changing the value of any nation’s currency, many governments, corporate houses are concerned about the volatility of the value of their currency. The Currency depreciates when the worth of a country’s currency drops significantly compared to other currency. There are various impact of currency depreciation ranging from micro level such as inflation, Low performance of Industry/Sector, to macro level such as negative growth rate of GDP, economic instability, Even impacting Global economy by disrupting interrupting international trade. The approach involves gathering insights from previously published research papers and articles as well as from watching recorded interviews from professionals in the field of the topic. Also, data from the government websites are being used to get comprehensive answer. As all the data have been taken from secondary sources so there is no requirement for conducting survey. The main agenda of this research paper is to study different factors that causes the volatility of the currency and analyze the impact of the currency depreciation on the economy and different variables that contribute in currency losing its value. The paper provides brief insight on depreciation of currency and its causes. The research also explains different factors (monetary and non-monetary) such as inflation, interest rates, government policies and how those variables affect the value of the currency. Also, with the causes this paper sheds light on the consequences (monetary and non-monetary) such as rise in cost of imported good, Negative balance of trade, Impact in balance of payment, reduced foreign investment, reduced tourism and how various sector of economy acts simultaneously with decrease in value of the currency. Also, with changing landscape of the economy, the policymakers and investors must be alert and be prompt with their decision making in order to make their companies and country stay afloat. The paper helps various investors and policymakers with insights and recommendation on how policy makers and investors should manage the risk and opportunities that comes with the depreciating currency