Introduction

Few events in the economic life of a nation and its policymakers are so profoundly affecting as currency devaluation. With the advent of managed floating in the 1970s, exchange rate fluctuations were rendered commonplace and robbed of much of their drama. Things were far different under the classical gold standard and the Bretton Wood system. In those days, if a nation was forced to devalue the competence of its policy-makers was called into question. Devaluation was a symbol of defeat: it reflected the authorities’ failure to contain market forces and to provide a stable basis for economic growth. On the few occasions that governments elected to devalue of their own accord, the event provided an opportunity for them to reassess their approach to managing the economy and marked a turning point in the formulation of economic policy. But regardless of the circumstances, devaluation was an event of great moment, which occurred amidst controversy, publicity and impassioned debate.