Yes, good question.
Actually the process is not so simple as I told you earlier. The above mentioned situation is an ideal one and for almost always it never happens so simply.
Practically speaking, devaluation can increase inflation in three ways as following;
A devaluation could cause inflation for 3 reasons.

Firstly, there is likely to be an increase in AD. As AD = C+I+G+X-M, if exports are cheaper, there will be more exports sold and the quantity of imports will fall. If the economy is close to full capacity (i.e. full employment level), then higher AD will cause inflation.

However, increased AD may not cause inflation, it depends on various factors:
a) If the economy is in recession and there is spare capacity (i.e. unemployment), a rise in AD will not cause inflation.
b) If other components of AD are not increasing (e.g. consumer spending is low), then there is unlikely to be demand pull inflation. (X-M is not the biggest component of AD).
c) Also if exports are cheaper, then the effect on AD depends upon the elasticity of demand. If demand is inelastic, there will only be a small increase in Quantity and there could be a fall in the value of exports.

Secondly, if there is a devaluation, then there will be an increase in the price of imported goods. Imports are quite a significant part of the RPI (Retail Price Index), therefore there will be cost push inflation. However, it is possible that retailers may not pass the price increases onto consumers but have lower profit margins.

Thirdly, if there is a devaluation, exports become less competitive without firms having to make much efforts, therefore there is less incentive for them to cut costs and therefore in the long run costs will increase and therefore inflation will increase. However this may not occur if firms are well run and they keep incentives to cut costs.

(See the following example of the UK.
The UK devalued its currency quite significantly in 1992 when it left the ERM, however it didn’t cause inflation. This was because the economy was in a recession and there was a lot of spare capacity. This shows there are many other factors affecting inflation. However, in the 1950 and 1960s inflation in the UK was often blamed upon the depreciating £.)

Hope I make it clear now. You can ask as many times and as many questions as you need to clear the concept. I welcome you always.

Regards,
Imran Saifi.

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“Those who danced were thought to be quite insane by those who could not hear the music.”