This paper analyzes the mechanism of the impact of the depreciation of the local currency on imports

1. Impact of income and expenditure:

The depreciation of the local currency has an impact on import and export earnings. The depreciation of a country's currency reduces the value of its own goods relative to foreign products, so that foreign people increase their demand for domestic products, and their residents reduce their demand for foreign products, which is conducive to its own exports and reduces imports; The purchasing power of foreign currency.

Relative increase, depreciation of domestic goods, services, transportation, accommodation and other expenses are relatively cheap, which is conducive to attracting foreign tourists, expanding the development of tourism, and promoting the increase of employment and national income.

The depreciation of the local currency also has an impact on international capital flows. If the depreciation trend continues, people will move money from their home countries to other countries, causing capital outflows.

2. Domestic influence:

After the depreciation of the local currency, a country's income will often be improved, and the proportion of the foreign trade sector in the entire economic system will expand, thereby improving the degree of opening up of the country to the outside world, and more products can compete with foreign products.

The depreciation of the local currency also has an impact on prices. On the one hand, the expansion of exports has caused demand to pull up prices; On the other hand, by raising the cost of domestic production.

The impact of currency depreciation on prices will gradually expand to all commodities, which can easily lead to inflation.

3. World Impact:

Exchange rate changes in small countries have only a slight impact on the economies of partner countries, but currency depreciation in major industrial countries can affect their countries' balance of payments, which can lead to wars.

and exchange rate wars, and affect the world economy.

development. Changes in the exchange rates of the major industrialized countries can also give rise to international finance.

Turbulence in the field. International** and borrowing activities will lead to the sucking in of depreciated currencies.

The party that suffers a loss, and the party who has to pay for the depreciated currency, will profit from it.

The instability of the exchange rates of major currencies can also have a huge impact on the international reserve system and the international financial system.

The official website shall prevail.

1) By taking advantage of the changes in the foreign exchange rate of the local currency, the foreign currency** of export goods and the local currency** of imported goods can be adjusted to achieve the purpose of adjusting the balance of payments.

2) When there is a deficit in the balance of payments, the depreciation of the local currency is used to make the foreign currency of exports fall and promote the increase of exports, and the increase of imported local currency and the decline of imports to adjust the balance of payments.

3) Condition: The other party does not retaliate; The local currency depreciates externally faster than internally (inflation); To meet the Marshall-Lerner condition, that is, the absolute value of the sum of the **demand elasticity of domestic exports and the **demand elasticity of domestic imports** is greater than 1, that is, the degree of response of imports and exports to ** changes is greater.

4) The depreciation of the local currency will cause the balance of payments to continue to deteriorate first, and then to improve. In most cases, the depreciation of the local currency will worsen the conditions of a country, which will only improve when the elasticity of demand is greater than the elasticity of supply.

Depreciation means that the same amount of local currency can be exchanged for less foreign currency, that is to say, the same amount of foreign currency can be exchanged for more local currency, so the impact is; a, it is conducive to increasing exports. b, it is conducive to curbing imports.

Extended Materials

The benefits of currency depreciation

After the depreciation of the currency, due to the decrease in imports, the competition in the domestic sales market will be reduced, the sales of domestic goods will increase, and the number of jobs will increase; And due to the increase in exports, the profits of exporting enterprises will increase, which will also lead to an increase in employment opportunities.

The disadvantages of currency depreciation

First, domestic prices have appeared, leading to inflation.

Second, there will be a large outflow of funds, and there will be instability in the financial market.

Third, the cost of studying abroad and traveling has risen.

Fourth, the pros and cons of domestic prices: consumer prices**; ** and the property market ****, the asset bubble burst.

1.Imports affect prices: prices of production and consumer goods**.

The depreciation of the currency exchange rate will cause the **** of imported goods in the country and promote the overall price level to rise. The country needs to import a large amount of oil, iron ore, timber, soybeans, grain and other production and consumer goods every year, which are settled in US dollars. If the currency continues to depreciate, the imports of these consumer goods** will increase, which will lead to an increase in the cost of the entire industrial chain, which will eventually be passed on to consumers and cause inflation.

2.Capital flows affect prices: the property market bursts.

The continuous depreciation of the currency exchange rate will cause international capital investors to have pessimistic expectations, causing them to sell (sell) a large number of **, real estate in China, etc., and then use the realized currency to exchange for foreign currencies such as US dollars and flee abroad (hot money flight). As a result, the property market continued, and the domestic asset bubble burst.

Pros and cons on domestic prices

1.Currency depreciation, domestic consumer prices will definitely be **.

2.Domestic depreciation of the currency, i.e., excessive issuance. This will lead to the expansion of assets such as the property market.

3.The international depreciation of the currency, that is, the international market is not optimistic about the country. Then, there will be capital flight, which will lead to the bursting of the asset bubble in the ** and the property market.

There are many factors that affect foreign exchange volatility. The main ones are: the impact of the balance of payments.

The balance of payments is the total amount of revenue and expenditure caused by all economic transactions between a country and foreign countries in a certain period of time (usually within a year). It is a record of economic interactions between a country and other countries. The balance of payments is reflected centrally in the balance of payments, which is prepared on the principle of double-entry accounting.

The balance of payments consists of two main items: the current account and the capital account.

The current account, also known as the goods and services account, refers to the transactions of goods and services that occur frequently. These include the import and export of tangible goods (i.e., international**); Intangible**, such as transportation, insurance, tourism income and expenditure; and international transfers, such as reparations, aid, remittances, gifts, etc.

Extended information: 1. Monetary policy is a way to regulate and control the economy corresponding to fiscal policy, mainly to promote economic growth through the control of monetary liquidity, or to prevent the economy from overheating. In the vernacular, it is to regulate the economy by increasing or decreasing the amount of money on the market to have an impact on the economy.

A country's monetary policy is generally formulated and implemented by the central bank, for the United States this institution is the Federal Reserve, and for China it is the People's Bank of China.

2. In the general period of economic growth, the main goal of monetary policy is to ensure monetary liquidity, which is compatible with economic growth and the growth of aggregate commodities. When the economy grows, the total amount of commodities will also increase, if the liquidity of money in the market is lower than that of commodities, the total amount will produce deflation, which means that the ** of commodities can not be realized and the imitation value will hit the willingness of producers to reinvest, so that economic growth occurs. On the other hand, if the increase in monetary liquidity is higher than the need for economic growth, then there will be inflation in the market, and the growth of commodities will put pressure on the consumer market, which is not conducive to economic growth, and will also erode the results of economic growth.

3. For China, in the past few decades of reform and opening up, the economy has grown rapidly, and the currency multiplier has been rising, so the demand for currency liquidity has increased sharply, and the amount of China's currency has been rising, which is to meet the needs of economic growth.

4. During the period of economic cyclical fluctuations, monetary policy plays a role in stabilizing economic fluctuations. During the recession, the central bank will generally adopt an accommodative monetary policy to increase monetary liquidity, on the one hand, to ensure that the financing cost in the market is reduced to help enterprises tide over the difficulties, and on the other hand, the trend will push up inflation to increase investment intentions. After the 2008 financial crisis and the 2020 recession, the Fed cut interest rates to zero and started quantitative easing to increase monetary liquidity.

When there is a risk of overheating or stagflation, monetary policy will tend to tighten to bring down inflation and reduce the risk of bubbles.

Answer]: True. Reason: Because of the depreciation of a country's local currency and the appreciation of foreign currency, the country's export commodities may decrease in foreign currency, and the ** of imported goods in local currency may increase, so imports will be reduced and exports will be expanded.