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QE and deteriorating FX rates

R

r_v.s

Member
In the sept 2013 paper's solution, it says as a result of QE, the exchange rate may deteriorate, that i can understand. But it also says


"The lower value of the currency may also make it relatively cheaper for the
government to repay its debt." How so?
 
It may be a strange way of saying that, if the country's currency weakens, its overseas earnings will rise due to increased competitiveness, and inflation will also rise in the country. Both of these make it easier to repay government debt because tax revenues will rise from increased exports (corporation tax), and tax revenues should rise in line with inflation (ie faster) due to tax on incomes.

PS - I think this is April 2012 for the record.
 
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