Over the years we have grown accustomed to listening about the value of our currency (the Malta lira previously and the euro now), without giving much thought to what the impact of an increase or decrease in value really means. Moreover, with the introduction of the euro as our currency, there was the correct positive perception that Malta would be better off by forming part of a monetary union and by having an internationally recognised currency as its currency.
Again, playing on perceptions, we all feel better when we learn that the value of our currency has increased and feel worse when the opposite happens.
However, the value of currencies goes well beyond perceptions. When a currency increases in value, it would mean that goods and services produced in the country where that currency is used have become more expensive when compared to other countries.
This means imports become cheaper. Similarly, when the currency decreases in value, the cost of producing a good or service goes down when compared to other countries, resulting in cheaper exports. In fact, students of economics learn that when a country wishes to boost its economy through increased exports, it would tend to...
↧