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The welfare effects of a large depreciation : the case of Egypt, 2000-05

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  • Kraay, Aart

Abstract

The Egyptian pound depreciated sharply between 2000 and 2005, declining by 26 percent in nominal trade-weighted terms. The author investigates the effect of the large depreciation on household welfare operating through exchange rate-induced changes in consumer prices. He estimates exchange rate pass-through regressions using disaggregated monthly consumer price indices to isolate the impact of the exchange rate changes on consumer prices. Then he uses household-level data from the 2000 and 2005 Egyptian household surveys to quantify the welfare effects of these consumer price changes at the household level. The average welfare loss due to exchange rate-induced price increases was equivalent to 7.4 percent of initial expenditure. Stronger estimated exchange rate pass-through for food items imply that this effect disproportionately affected poorer households.

Suggested Citation

  • Kraay, Aart, 2007. "The welfare effects of a large depreciation : the case of Egypt, 2000-05," Policy Research Working Paper Series 4182, The World Bank.
    • Handle: RePEc:wbk:wbrwps:4182
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    References listed on IDEAS

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    7. Ferreira, Francisco H. G. & Leite, Phillippe G. & Pereira da Silva, Luiz A. & Picchetti, Paulo, 2004. "Can the distributional impacts of macroeconomic shocks be predicted? A comparison of the performance of macro-micro models with historical data for Brazil," Policy Research Working Paper Series 3303, The World Bank.
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    Cited by:

    1. Anatoli Colicev & Joris Hoste & Jozef Konings, 2019. "Exchange Rate Pass-through after a Large Depreciation," Working Papers 201902, University of Liverpool, Department of Economics.
    2. Rodriguez Takeuchi,Laura Kiku & Atamanov,Aziz, 2021. "Welfare and Distributional Impacts of Inflation and the COVID-19 Outbreak in the Islamic Republic of Iran," Policy Research Working Paper Series 9558, The World Bank.
    3. Woldie, G., 2018. "The Cost of Exchange Rate Devaluation on the Rural Poor in Ethiopia," 2018 Conference, July 28-August 2, 2018, Vancouver, British Columbia 275932, International Association of Agricultural Economists.
    4. World Bank, 2007. "Arab Republic of Egypt : Poverty Assessment Update, Volume 1. Main Report," World Bank Publications - Reports 7642, The World Bank Group.

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    Keywords

    Markets and Market Access; Access to Markets; Economic Theory&Research; Poverty Lines; Commodities;
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