Currency undervaluation is such a potent instrument for growth for the simple reason that it creates incentives for the economy s growth promoting sectors.

President Miguel de la Madrid resorted to currency devaluations which in turn sparked inflation.

Indeed, without the single currency, many of these countries would have succumbed to a downward spiral of devaluation, default, and recourse to the IMF.

Devaluation is not an option because of the common currency.

During the 1998 financial crisis, devaluation would have hurt those who owned local real estate but had little earnings or assets in US dollars.

This could be an explicit devaluation or an implicit one due to a price reduction, made possible by the reduction in unit production costs resulting from the extra working time at constant pay.

It stimulates production (and hence employment), unlike overvaluation, which stimulates consumption.

But a rising euro pushed higher by excessively early monetary tightening by the ECB implies more real appreciation, further undermining competitiveness.

The euro is not overvalued or poorly managed, which would undermine competitiveness and erode confidence in the currency s long term stability.

Export led growth did not take place rapidly after devaluation, because of either the narrow base of exports or adverse conditions in global markets.

Currency undervaluation has become a substitute.

And that means further depreciation of the dollar.

But the currency s overvaluation also underlies the lack of competitiveness that curbs franc zone countries capacity to diversify their economies, create added value, and develop.

Third, the rate of currency appreciation has edged up.

The government was also too slow in depreciating the ruble.

But all of the options that might restore competitiveness require real currency depreciation.

The government, unable to print money to bail out the banks or increase export competitiveness through currency devaluation, is left with only two options default or deflation (austerity).

Currency undervaluation à la China will not go unnoticed.

Its purpose is not to encourage the depreciation of the yen, despite complaints about the yen s depreciation.

First, it contributes to yen depreciation and dollar appreciation as carry traders switch out of yen.

An undervalued currency enables an economy to integrate into the world economy on the basis of strong export performance. It stimulates production (and hence employment), unlike overvaluation, which stimulates consumption.

Given Italy s adverse competitiveness position, devaluation of the currency, were it possible, would not be a long term substitute for productivity boosting reforms, but it certainly would help in at least three ways.

Italy needs to learn how to live with the euro and within the eurozone, which means adopting policies that ensure that productivity growth and innovation, not currency devaluation, are the main drivers of competitiveness.

The effect will be much the same as a currency appreciation.

The irony is that the euro has been a hugely successful project, bringing considerable stability to participating countries. Indeed, without the single currency, many of these countries would have succumbed to a downward spiral of devaluation, default, and recourse to the IMF.

Why should the French undertake painful reforms when their newly elected leader has just promised to protect them from a strong currency and further interest rate increases? Why not simply wait for Sarkozy to get the euro down and the ECB to lower interest rates?

Since the 1990 s, both China and India have received a huge boost from their undervalued currencies.

A sizeable reduction in aggregate demand through RMB appreciation is achievable without being imprudent, because the current account surplus in 2007 was 9.5 of GDP.

So it began to promote its industries through an undervalued currency instead.

An independent monetary policy requires a flexible exchange rate, not a revaluation.

A return to a national currency and a sharp depreciation would quickly restore competitiveness and growth.

A series of devaluations followed, the later ones in part due to the Korean War.

Nor is the Fed specifically aiming to lower the dollar s value.

When this pattern is combined with the depreciation of the new Israeli shekel (NIS) in 2003 and then its appreciation in 2004, it is clear that while the Palestinian trade balance does not benefit from the depreciation of the Israeli currency, it suffers the full negative impact of currency appreciation.

Conventional macroeconomists like me look at America s current account deficit, now running at 7 of GDP, and know that such vast deficits are inevitably followed by large currency depreciations.

But no one has the right to complain about the central bank s high interest rate, appreciated currency policy when fiscal policy remains too lax for interest rates to be reduced without risking price stability.

Many emerging economies authorities intervene in currency markets to prevent exchange rate appreciation and a loss of export competitiveness.

On the contrary, they should view the currency peg as a valuable gift.

It was write offs and devaluations, not austerity programs, that allowed bond prices to recover.

Eurozone membership precludes inflation and devaluation as adjustment mechanisms.

Some resist appreciation actively and openly others do so in a less visible manner.

The won has been devalued sharply, making exports more viable.

Since the amount of foreign reserves available to defend a weak currency (a currency in low demand) is limited, a currency crisis or devaluation could be the end result.

Dollar depreciation improves Europe s terms of trade and real income.

First, the value of financial institutions investments should immediately be marked down to their market values.