The Welfare Effects of a Large Depreciation : The Case of Egypt, 2000-05

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...

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Bibliographic Details
Main Author:	Kraay, Aart
Format:	Policy Research Working Paper
Language:	English
Published:	World Bank, Washington, DC 2012
Subjects:	AVERAGE PRICE AVERAGE SPENDING BENCHMARK COMMODITIES COMMODITY CONSUMER PRICE CONSUMER PRICE INDEX CONSUMER PRICE INDICES CONSUMER PRICES CONSUMERS CONSUMPTION BUNDLE CONSUMPTION BUNDLES CONSUMPTION PATTERNS DEMAND FUNCTION DEMAND FUNCTIONS DEVALUATION DEVELOPING COUNTRIES DEVELOPMENT ISSUES ECONOMETRICS ECONOMIC GROWTH ECONOMIC REVIEW ELASTICITY EXCHANGE RATES EXPENDITURE EXPENDITURE DISTRIBUTION EXPENDITURE FUNCTION FINANCIAL CRISIS FOOD ITEM FOOD ITEMS FOOD PRICES GROWTH RATE HEADCOUNT MEASURE HOUSEHOLD CHARACTERISTICS HOUSEHOLD EXPENDITURE HOUSEHOLD LEVEL HOUSEHOLD SIZE HOUSEHOLD SURVEY HOUSEHOLD SURVEYS HOUSEHOLD WELFARE INCOME INCOME DISTRIBUTION INCOME EFFECT INCOME LEVELS INFLATION MACROECONOMIC SHOCKS MARGINAL COSTS MEASURING WELFARE MONEY SUPPLY NON-FOOD ITEMS NONTRADED GOODS POLICY RESEARCH POLITICAL ECONOMY POOR HOUSEHOLDS POVERTY ASSESSMENT POVERTY LINES PRICE CHANGE PRICE CHANGES PRICE INCREASES PRICE VARIATION PRODUCER PRICE PRODUCER PRICE INDEX PRODUCER PRICE INDICES PURCHASING REAL INCOME RELATIVE PRICE RURAL AREAS RURAL HOUSEHOLDS SPATIAL VARIATION SUBSTITUTE SUBSTITUTION SUBSTITUTION EFFECT URBAN AREAS URBAN HOUSEHOLDS UTILITY FUNCTION WAGES WORLD TRADE ORGANIZATION
Online Access:	http://documents.worldbank.org/curated/en/2007/04/7489948/welfare-effects-large-depreciation-case-egypt-2000-05 http://hdl.handle.net/10986/7043

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Summary:	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.

The Welfare Effects of a Large Depreciation : The Case of Egypt, 2000-05

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