Appreciation vs. Revaluation

By Jaxson

  • Revaluation

    Revaluation is a change in a price of a good or product, or especially of a currency, in which case it is specifically an official rise of the value of the currency in relation to a foreign currency in a fixed exchange rate system. In contrast, a devaluation is an official reduction in the value of the currency. Under floating exchange rates, a rise in a currency’s value is an appreciation. Altering the face value of a currency without changing its purchasing power is a redenomination, not a revaluation (this is typically accomplished by issuing a new currency with a different, usually lower, face value and a different, usually higher, exchange rate while leaving the old currency unchanged; then the new replaces the old).

    In a fixed exchange rate system, the central bank maintains an officially announced exchange rate by standing ready to buy or sell foreign currency at that rate. In general terms, revaluation of a currency is a calculated adjustment to a country’s official exchange rate relative to a chosen baseline. The baseline could in principle be anything from wage rates to the price of gold to a foreign currency. In a fixed exchange rate regime, only a decision by a country’s government (specifically, its central bank) can alter the official value of the currency.

    For example, suppose a government has set 10 units of its currency equal to one US dollar. To revalue, the government might change the rate to 9.9 units per dollar. This would result in that currency being slightly more expensive to people buying that currency with U.S. dollars than previously and the US dollar costing slightly less to those buying it with foreign currency.

  • Appreciation (noun)

    A fair valuation or estimate of merit, worth, weight, etc.; recognition of excellence.

    “We give to you this trophy as a token of our appreciation of all your years of service.”

  • Appreciation (noun)

    Accurate perception; true estimation.

    “an appreciation of the difficulties before us”

    “an appreciation of colors”

  • Appreciation (noun)

    A rise in value.

  • Revaluation (noun)

    The process of altering the relative value of a currency or other standard of exchange.

    “After the new party took power, the government declared a revaluation of the currency in an attempt to limit runaway inflation.”

  • Revaluation (noun)

    A reassessment of the value or worth of something; a reappraisal or reevaluation.

    “After the soldiers raided her farm for supplies, she was forced to a revaluation of their benefit as protectors.”

  • Revaluation (noun)

    The application of compound growth to the value of a pension benefit, specifically from the date of the member leaving the scheme (for example, moving to a different employer) to the date that the member starts receiving the benefit (typically retirement).


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