Countries with lower initial current account deficits, with import and export prices sensitive to exchange rate movements and with imports and exports with high price elasticity of demand would see their current account deficits quickly restored to sustainable level due to depreciation of their currency. Country B imports goods that have high price elasticity. Country A has large current account deficit and hence will take time to adjust to sustainable level. Country C exports commodities whose global prices are not sensitive to their own currency’s values. |
