Exchange rate devaluation in East Africa worsens trade balance, study finds.
The study looked at how changes in exchange rates affect trade balance in East African countries from 1990 to 2014. They found that when the exchange rate goes down, the trade balance gets worse. This means that when the value of the local currency decreases, it leads to more imports and less exports, causing a trade deficit. The researchers also discovered that when domestic income goes up, people tend to buy more imports, which also contributes to a trade deficit. Overall, the study suggests that countries should be careful not to devalue their currency too much and focus on trading with wealthier nations to improve their trade balance in the long run.