Currency depreciation can really change how a country trades with others. Here’s how it works:

1. Cheaper Exports:

   • When a country's money loses value, its products become less expensive for people in other countries. For example, if Sweden's money, the krona, loses 10% of its value, then Swedish products cost 10% less for buyers outside Sweden. This usually means that more people will buy Swedish goods.

2. More Expensive Imports:

   • On the flip side, when the currency drops in value, buying things from other countries costs more. So, if the krona depreciates by 10%, a foreign product that costs $2 per kilogram will now cost$2.20. This higher price can make people in Sweden buy less of those products.

3. Better Trade Balance:

   • A better trade balance happens when a country sells more to other countries than it buys from them. Before the currency lost value, let’s say Sweden was exporting $100 billion worth of goods and importing$80 billion. After the depreciation, if exports go up to $110 billion and imports rise to$88 billion, then Sweden's trade balance improves from $20 billion to$22 billion.

4. Research Findings:

   • Studies show that if a currency depreciates by 1%, exports usually go up by about 0.5%, and imports drop by around 0.3%. This shows how closely tied the value of a currency is to trade.