Economists read here

[ReDrOc]

Ok, so basically I'm doing an essay atm. I was reading up about fixed exchange rates and currency boards and it said this:

"Suppose a country has a deficit because it imports too much. Importers take domestic money to the currency board to get foreign exchange they need; the board simply keeps the domestic money, which is retired from circulation"

If they're in a trade deficit, why would they want to get give their domestic currency to the currency board when it'll just mean that domestic currency supply will decrease => an appreciation => uncompetitive export prices => larger trade deficit

Am I missing something here?

[Erador]

You're confusing two distinct points-- the trade deficit of a nation and the actions of individual firms.

[ReDrOc]

You're confusing two distinct points-- the trade deficit of a nation and the actions of individual firms.

If it's a trade deficit of a nation, what then?

[Erador]

I don't know what you've covered already, but if the nation "prints its own money" then there won't be a decline in the supply of its own currency. It would just print the money needed.