Countries may gain an advantage in international trade if they manipulate the value of their currency by artificially keeping its value low, obviously by the national central bank engaging in open_market operations. It is argued that the People’s Republic of China has succeeded in doing this over a long period of time. However, in a real world situation, a 2005 appreciation of the Yuan by 22% was followed by a 38.7% increase in Chinese imports to the US.
In 2010, other nations, including Japan and Brazil, attempted to devalue their currency in the hopes of subsidizing cheap exports and bolstering their ailing economies. A low exchange rate lowers the price of a country’s goods for consumers in other countries but raises the price of goods, especially imported goods, for consumers in the manipulating country.