"Devaluation" is the official depreciation of a currency against one or more other currencies, where this depreciation is not based on free market forces, but results from a central bank policy action. It also used to mean depreciation against gold, under the gold standard.

Devaluation makes the domestic currency cheaper relative to other currencies, which has two main effects: the country's exports become relatively cheaper for foreign countries, while foreign products become more expensive for domestic consumers, discouraging imports. As a result, devaluation can help increase exports, reduce imports, and reduce a current account deficit.

At the same time, devaluation can increase the prices of imported goods, which can fuel inflation. This can eventually lead to a wage-price spiral, which in turn negates the positive effects of devaluation. Devaluation is sometimes used as part of broader economic shock therapy to stabilize or stimulate an economy.