Revaluation effect

If the exchange rate of a currency, e.g. the EUR, rises against another currency such as the USD, the INR, this results in unfavorable and favorable effects for the currency area affected by the revaluation, which are difficult to calculate in advance – if there is a close trade connection or – if invoicing in one of the currencies concerned is customary internationally – e.g. animal feed, metals and crude oil are invoiced worldwide in USD. – When the EUR rose sharply against the USD in 2002 and then again in 2007, this relieved consumers of a double-digit billion amount in the case of crude oil alone and was thus greater than any tax cut. However, this was hardly noticed by the public; an increase in taxes by even a fraction of a percent, on the other hand, is discussed in detail: a prime example of an impairment of perception. – See Oil Price Shocks.

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
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