Devaluation derives its values up in terms of the domestic currency. Devaluation reduces the trade deficit in the short run by inducing economic contraction. Consequent to reduction, trade gap might be substantial with devaluation since imported capital goods will make the large share which can be up to 50% or more investment in many countries.

The effect of devaluation will wear away as the prices of non-traded goods and cost of labor catch up in the goods that are traded.

As long as depreciation is there substitution action like export promotion and import substitution will take place in the country until the currency value catches up over again.