Seycehelles : Welfare Impacts of Exchange Rate Adjustment and Policy Options

This paper studies likely macroeconomic impacts and social consequences of devaluation of the Seychelles rupee. Analyzing potential welfare impacts of devaluation ex ante is crucial for policy making, since information obtained from such analyses w...

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Bibliographic Details
Main Authors:	Kojo, Naoko C., Ivaschenko, Oleksiy
Format:	Working Paper
Language:	English en_US
Published:	World Bank, Washington, DC 2015
Subjects:	TARIFFS TOTAL REVENUE DURABLE GOODS FOREIGN CAPITAL WORLD TRADE ORGANIZATION PRODUCTION ADVERSE IMPACTS STOCK FISCAL DEFICITS INCOME INTEREST EXPECTATIONS REAL GDP EXCHANGE BALANCE OF PAYMENTS MACROECONOMIC POLICY CONSUMER GOODS GDP PER CAPITA LIQUIDITY DEVELOPING COUNTRIES EXPORTS WELFARE SYSTEM TAX COLLECTION REPAYMENTS BLACK MARKET ECONOMIC STRUCTURE FISCAL POLICY WELFARE DEVALUATION EQUILIBRIUM VARIABLES TAX REAL INCOME INPUTS PAYMENTS WEALTH INFORMATION SYSTEMS CREDITORS INFLATION PENSION SAFETY NETS BUDGET CONVERSION LABOR MARKET INFLUENCE TRADE BALANCE OIL PRICES DERIVATIVES DEMAND FOR MONEY CURRENCY EXPORT GROWTH CONTRACTS INFLATIONARY PRESSURES FINANCES MACROECONOMIC MODELS EXCHANGE RATES OPTIONS MONOPOLY EQUIPMENTS DEBT INFLATIONARY PRESSURE HOUSEHOLD INCOME RETURN DEFICITS INFLATION RATE CONSUMPTION EXPENDITURE EXCESS LIQUIDITY INTERNATIONAL ECONOMICS DOMESTIC DEBT LOANS DIRECT INVESTMENT RESERVES UTILITY HOUSEHOLD WEALTH FOREIGN CURRENCY PRODUCTION INPUTS BANK POLICY PUBLIC INVESTMENT EXPENDITURE EQUILIBRIUM ANALYSIS UNEMPLOYMENT DEREGULATION CONSUMPTION BUDGET CONSTRAINT INCOME SECURITY CAPITAL OUTLAYS GOOD WAGES COUPONS FINANCIAL CRISIS FOREIGN FINANCING FUTURE VALUE PENSIONS WAGE RATES COMPETITIVENESS FOREIGN DIRECT INVESTMENT RETURNS CREDIT MACROECONOMICS PURCHASING POWER DEMAND GOVERNMENT EXPENDITURE UTILITY FUNCTION INVESTMENT PROJECTS AGGREGATE DEMAND PRICE CHANGES ECONOMY CONSUMERS EXCESS DEMAND EXPENDITURES PROPERTY CURRENCY DEVALUATION TAX RATES REAL EXCHANGE RATE MARKET DEFAULT BENCHMARK FOREIGN EXCHANGE TRADE LIBERALIZATION INCOME EFFECT PRODUCTION FUNCTION BALANCE OF PAYMENT TREASURY MACROECONOMIC VARIABLES HOLDINGS GOVERNMENT DEBT GOVERNMENT POLICIES PARTIAL EQUILIBRIUM ANALYSIS MACROECONOMIC SHOCKS ECONOMIC DEVELOPMENT TRADE MACROECONOMIC VARIABLE GDP GOODS GENERAL EQUILIBRIUM ANALYSIS GLOBAL TRADE SECURITY TRANSFER PAYMENTS DURABLE GROWTH RATE SUBSTITUTION EFFECT INVESTMENT PRICE CEILINGS BOND SHARE PUBLIC FINANCES POVERTY ADVERSE IMPACT FOREIGN INTEREST ADVERSE EFFECT CAPITAL INFLOWS GINI COEFFICIENT REVENUE PROFIT PUBLIC SECTOR DEBT MACROECONOMIC POLICIES EXCHANGE RATE INSTRUMENT REMITTANCES PUBLIC SPENDING PRICE CONTROLS ARREARS CAPITAL FLIGHT ADVERSE EFFECTS PRICES EXTERNAL BORROWING DEVELOPMENT POLICY
Online Access:	http://documents.worldbank.org/curated/en/2015/07/24788385/welfare-impacts-exchange-rate-adjustment-policy-options http://hdl.handle.net/10986/22423

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Summary:	This paper studies likely macroeconomic impacts and social consequences of devaluation of the Seychelles rupee. Analyzing potential welfare impacts of devaluation ex ante is crucial for policy making, since information obtained from such analyses would allow policy makers to design cost-effective, well-targeted policy measures, with the aim of mitigating negative social consequences of devaluation. Based on the estimated welfare impact of devaluation, the paper considers mitigation policy options, and discusses their effectiveness and associated budgetary costs. The focus of this study is the likely impacts of devaluation on the prices, economy and social welfare. The reminder of the paper is structured as follows. Section two first analyzes Seychelles’ household expenditure survey data and presents the incidence of poverty and inequality in Seychelles. Section three then discusses how the Seychelles economy would adjust to an initial devaluation of the US dollar value of the rupee by 45 percent, followed by a gradual move to an equilibrium level. Projected macroeconomic variables and prices are applied to the household survey data to estimate possible impacts on the incidence of poverty. Section four discusses a variety of policy measures designed to alleviate the adverse impacts on the poor. Fiscal viability of these measures is also discussed in this section. Section five concludes the paper.

Seycehelles : Welfare Impacts of Exchange Rate Adjustment and Policy Options

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