Devaluation Marshall Learner Approach

The Marshall-Lerner approach states that devaluation of a currency will improve the balance of payments if the sum of the price elasticities of demand for exports and imports is greater than one. Devaluation makes a country's exports cheaper and imports more expensive, which can increase exports and decrease imports to reduce a current account deficit. However, its effects are only seen in the long-run as consumers and producers adjust, and the approach makes simplifying assumptions and ignores factors like domestic inflation and income distribution effects.