Publication:
Fiscal and Social Impact of a Nominal Exchange Rate Devaluation in Djibouti

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dc.contributor.authorAnós Casero, Paloma
dc.contributor.authorSeshan, Ganesh
dc.date.accessioned2012-06-26T14:02:32Z
dc.date.available2012-06-26T14:02:32Z
dc.date.issued2006-10
dc.description.abstractLimited fiscal space limits Djibouti's ability to meet the Millennium Development Goals and improve the living conditions of its population. Djibouti's fiscal structure is unique in that almost 70 percent of government revenue is denominated in foreign currency (import taxes, foreign aid grants, and military revenue) while over 50 percent of government expenditure is denominated in local currency (wages, salaries, and social transfers). Djibouti's economic structure is also unusual in that merchandise exports of local origin are insignificant, and the country relies heavily on imported goods (food, medicines, consumer and capital goods). A currency devaluation, by reducing real wages, could potentially generate additional fiscal space that would help meet Djibouti's fundamental development goals. Using macroeconomic and household level data, the authors quantify the impact of a devaluation of the nominal exchange rate on fiscal savings, real public sector wages, real income, and poverty under various hypothetical scenarios of exchange-rate pass-through and magnitude of devaluation. They find that a currency devaluation could generate fiscal savings in the short-term, but it would have an adverse effect on poverty and income distribution. A 30 percent nominal exchange rate devaluation could generate fiscal savings amounting between 3 and 7 percent of GDP. At the same time, a 30 percent nominal devaluation could cause nearly a fifth of the poorest households to fall below the extreme poverty line and pull the same fraction of upper middle-income households below the national poverty line. The authors also find that currency devaluation could generate net fiscal savings even after accounting for the additional social transfers needed to compensate the poor for their real income loss. However, the absence of formal social safety nets limits the government's readiness to provide well-targeted and timely social transfers to the poor.en
dc.identifierhttp://documents.worldbank.org/curated/en/2006/10/7111985/fiscal-social-impact-nominal-exchange-rate-devaluation-djibouti
dc.identifier.doi10.1596/1813-9450-4028
dc.identifier.urihttps://hdl.handle.net/10986/9002
dc.languageEnglish
dc.language.isoen_US
dc.publisherWorld Bank, Washington, DC
dc.relation.ispartofseriesPolicy Research Working Paper; No. 4028
dc.rightsCC BY 3.0 IGO
dc.rights.holderWorld Bank
dc.rights.urihttp://creativecommons.org/licenses/by/3.0/igo/
dc.subjectADEQUATE SAFETY NETS
dc.subjectADVERSE EFFECT
dc.subjectAGGREGATE DEMAND
dc.subjectAGGREGATE SUPPLY
dc.subjectAGRICULTURAL SECTOR
dc.subjectAGRICULTURE
dc.subjectBASE YEAR
dc.subjectBENCHMARK
dc.subjectCASH TRANSFERS
dc.subjectCOMPETITIVENESS
dc.subjectCONSUMERS
dc.subjectCONSUMPTION BEHAVIOR
dc.subjectCONSUMPTION INCREASES
dc.subjectCROWDING OUT
dc.subjectCURRENCY
dc.subjectCURRENCY BOARD
dc.subjectCURRENCY DEVALUATION
dc.subjectDEBT
dc.subjectDEMAND DECLINES
dc.subjectDEVALUATION
dc.subjectDEVELOPING COUNTRIES
dc.subjectDISCRETIONARY FISCAL POLICY
dc.subjectDOMESTIC PRICES
dc.subjectEARNINGS
dc.subjectECONOMIC PERFORMANCE
dc.subjectECONOMIC POLICY
dc.subjectECONOMIC STRUCTURE
dc.subjectELASTICITY
dc.subjectEMPIRICAL EVIDENCE
dc.subjectEXCHANGE RATE DEVALUATION
dc.subjectEXCHANGE RATE MANAGEMENT
dc.subjectEXCHANGE RATE REGIME
dc.subjectEXCHANGE RATES
dc.subjectEXPORTS
dc.subjectEXTERNAL DEBT
dc.subjectEXTREME POVERTY
dc.subjectEXTREME POVERTY LINE
dc.subjectFISCAL ADJUSTMENT
dc.subjectFISCAL BURDEN
dc.subjectFISCAL COSTS
dc.subjectFISCAL POLICY
dc.subjectFIXED EXCHANGE RATE
dc.subjectFOOD CONSUMPTION
dc.subjectFOOD PRICE
dc.subjectFOOD PRICES
dc.subjectFOOD STAPLES
dc.subjectFOREIGN CURRENCY
dc.subjectFOREIGN EXCHANGE
dc.subjectFOREIGN EXCHANGE EARNINGS
dc.subjectFOREIGN INTEREST RATE
dc.subjectFORMAL SAFETY NETS
dc.subjectFORMAL SECTOR
dc.subjectFORMAL SECTOR EMPLOYMENT
dc.subjectGDP
dc.subjectGDP DEFLATOR
dc.subjectGOVERNMENT EXPENDITURES
dc.subjectGOVERNMENT SPENDING
dc.subjectGROSS DOMESTIC PRODUCT
dc.subjectGROWTH RATE
dc.subjectHOUSEHOLD BUDGET
dc.subjectHOUSEHOLD CONSUMPTION
dc.subjectHOUSEHOLD EXPENDITURE
dc.subjectHOUSEHOLD INCOME
dc.subjectHOUSEHOLD LEVEL
dc.subjectHOUSEHOLD LEVEL DATA
dc.subjectHOUSEHOLD SURVEY
dc.subjectHOUSEHOLD SURVEYS
dc.subjectIMPACT ON POVERTY
dc.subjectIMPORT SUBSTITUTION
dc.subjectINCIDENCE OF POVERTY
dc.subjectINCOME DISTRIBUTION
dc.subjectINCOME TAXES
dc.subjectINDEXATION
dc.subjectINFORMAL SECTOR
dc.subjectINFORMAL TRANSFERS
dc.subjectINSURANCE
dc.subjectINTEREST RATE
dc.subjectINTEREST RATES
dc.subjectLABOR FORCE
dc.subjectLABOR MARKET
dc.subjectLABOR MARKETS
dc.subjectLOCAL CURRENCY
dc.subjectMARGINAL UTILITY
dc.subjectMIDDLE EAST
dc.subjectNATIONAL POVERTY
dc.subjectNATIONAL POVERTY LINE
dc.subjectNATURAL RESOURCES
dc.subjectNOMINAL EXCHANGE RATE
dc.subjectNORTH AFRICA
dc.subjectPER CAPITA INCOME
dc.subjectPOLICY RESEARCH
dc.subjectPOOR
dc.subjectPOOR HOUSEHOLD
dc.subjectPOOR HOUSEHOLDS
dc.subjectPOVERTY INCIDENCE
dc.subjectPOVERTY LEVELS
dc.subjectPOVERTY POVERTY
dc.subjectPOVERTY REDUCTION
dc.subjectPRIVATE CONSUMPTION
dc.subjectPRIVATE INVESTMENT
dc.subjectPRIVATE SECTOR
dc.subjectPRODUCTION COSTS
dc.subjectPUBLIC SECTOR
dc.subjectPURCHASING POWER
dc.subjectPURCHASING POWER PARITY
dc.subjectREAL EXCHANGE
dc.subjectREAL EXCHANGE RATE
dc.subjectREAL GDP
dc.subjectREAL GROWTH
dc.subjectREAL INCOME
dc.subjectREAL TERMS
dc.subjectREAL WAGES
dc.subjectRELATIVE PRICES
dc.subjectRISING TREND
dc.subjectRURAL
dc.subjectRURAL AREA
dc.subjectRURAL AREAS
dc.subjectRURAL HOUSEHOLDS
dc.subjectRURAL POOR
dc.subjectRURAL POVERTY
dc.subjectSAFETY NETS
dc.subjectSAVINGS
dc.subjectSCENARIOS
dc.subjectSLOW GROWTH
dc.subjectSOCIAL COSTS
dc.subjectSOCIAL SAFETY NETS
dc.subjectSOCIAL SECURITY
dc.subjectSOCIAL SPENDING
dc.subjectSOCIAL TRANSFERS
dc.subjectSTRONG APPRECIATION
dc.subjectSTRUCTURAL REFORMS
dc.subjectSUB-SAHARAN AFRICA
dc.subjectTAX REVENUES
dc.subjectTELECOMMUNICATIONS
dc.subjectTOTAL REVENUE
dc.subjectTRADABLE GOODS
dc.subjectUNEMPLOYMENT
dc.subjectUNEMPLOYMENT RATE
dc.subjectUTILITY FUNCTION
dc.subjectWAGES
dc.subjectWAR
dc.titleFiscal and Social Impact of a Nominal Exchange Rate Devaluation in Djiboutien
dspace.entity.typePublication
okr.crossref.titleFiscal And Social Impact Of A Nominal Exchange Rate Devaluation In Djibouti
okr.date.doiregistration2025-04-10T09:23:29.535224Z
okr.doctypePublications & Research::Policy Research Working Paper
okr.doctypePublications & Research
okr.docurlhttp://documents.worldbank.org/curated/en/2006/10/7111985/fiscal-social-impact-nominal-exchange-rate-devaluation-djibouti
okr.globalpracticeMacroeconomics and Fiscal Management
okr.globalpracticeSocial, Urban, Rural and Resilience
okr.globalpracticePoverty
okr.guid983951468032666430
okr.identifier.doi10.1596/1813-9450-4028
okr.identifier.externaldocumentum000016406_20061005151500
okr.identifier.internaldocumentum7111985
okr.identifier.reportWPS4028
okr.language.supporteden
okr.pdfurlhttp://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2006/10/05/000016406_20061005151500/Rendered/PDF/wps4028.pdfen
okr.region.countryDjibouti
okr.topicEconomic Theory and Research
okr.topicPoverty Reduction::Rural Poverty Reduction
okr.topicMacroeconomics and Economic Growth::Macroeconomic Management
okr.topicMacroeconomics and Economic Growth::Economic Stabilization
okr.topicFiscal and Monetary Policy
okr.topicRural Development
okr.unitDevelopment Research Group (DECRG)
okr.volume1 of 1
relation.isSeriesOfPublication26e071dc-b0bf-409c-b982-df2970295c87
relation.isSeriesOfPublication.latestForDiscovery26e071dc-b0bf-409c-b982-df2970295c87
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