Reading through the comments, I found that some HNers suggest that a weaker currency will boost exports. But I have a question that is looping in my mind: If currency weakness is due to inflation, won't the product price inflates? If I have a product that is worth $100 and tomorrow there is a USD inflation of 10%, won't the product be worth $110?
From my vague memories of an intro economics class I took two years ago, inflation devalues the inflated currency relative to others. It would cost someone in the US more, but a yen or a euro would buy more.
Yes, but someone who is paying in euros doesn't care what the price in dollars is, only what the cost in euros is. If yesterday $100 == 100 euros, but today $110 == 95 euros, then your $110 exported good now looks more attractive to people paying in euros, even though it's now more expensive at home.
If currencies were perfectly elastic then yes, the price of the exports would increase exactly to match the inflation. But they're not, if a currency falls it takes years for that change to be reflected in the prices. For example the Canadian dollar has been hovering near par for years and is now 5% higher but the prices of US imports are still higher than they should be.
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Reading through the comments, I found that some HNers suggest that a weaker currency will boost exports. But I have a question that is looping in my mind: If currency weakness is due to inflation, won't the product price inflates? If I have a product that is worth $100 and tomorrow there is a USD inflation of 10%, won't the product be worth $110?
I think you're conflating two ideas.
First, inflation internal to the US manifests itself, often enough, as higher prices.
Second, the reason this is good for exports is because it usually also takes less of the foreign currency to purchase our goods.
inflation is defined as higher prices
That is correct. However, the purchasing power of non monetary items is not effected by inflation.
From my vague memories of an intro economics class I took two years ago, inflation devalues the inflated currency relative to others. It would cost someone in the US more, but a yen or a euro would buy more.
Yes, but someone who is paying in euros doesn't care what the price in dollars is, only what the cost in euros is. If yesterday $100 == 100 euros, but today $110 == 95 euros, then your $110 exported good now looks more attractive to people paying in euros, even though it's now more expensive at home.
If currencies were perfectly elastic then yes, the price of the exports would increase exactly to match the inflation. But they're not, if a currency falls it takes years for that change to be reflected in the prices. For example the Canadian dollar has been hovering near par for years and is now 5% higher but the prices of US imports are still higher than they should be.