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

dc.contributor.author Anós Casero, Paloma
dc.contributor.author Seshan, Ganesh
dc.date.accessioned 2012-06-26T14:02:32Z
dc.date.available 2012-06-26T14:02:32Z
dc.date.issued 2006-10
dc.description.abstract Limited 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.identifier http://documents.worldbank.org/curated/en/2006/10/7111985/fiscal-social-impact-nominal-exchange-rate-devaluation-djibouti
dc.identifier.uri http://hdl.handle.net/10986/9002
dc.language English
dc.language.iso en_US
dc.publisher World Bank, Washington, DC
dc.relation.ispartofseries Policy Research Working Paper; No. 4028
dc.rights CC BY 3.0 IGO
dc.rights.holder World Bank
dc.rights.uri http://creativecommons.org/licenses/by/3.0/igo/
dc.subject ADEQUATE SAFETY NETS
dc.subject ADVERSE EFFECT
dc.subject AGGREGATE DEMAND
dc.subject AGGREGATE SUPPLY
dc.subject AGRICULTURAL SECTOR
dc.subject AGRICULTURE
dc.subject BASE YEAR
dc.subject BENCHMARK
dc.subject CASH TRANSFERS
dc.subject COMPETITIVENESS
dc.subject CONSUMERS
dc.subject CONSUMPTION BEHAVIOR
dc.subject CONSUMPTION INCREASES
dc.subject CROWDING OUT
dc.subject CURRENCY
dc.subject CURRENCY BOARD
dc.subject CURRENCY DEVALUATION
dc.subject DEBT
dc.subject DEMAND DECLINES
dc.subject DEVALUATION
dc.subject DEVELOPING COUNTRIES
dc.subject DISCRETIONARY FISCAL POLICY
dc.subject DOMESTIC PRICES
dc.subject EARNINGS
dc.subject ECONOMIC PERFORMANCE
dc.subject ECONOMIC POLICY
dc.subject ECONOMIC STRUCTURE
dc.subject ELASTICITY
dc.subject EMPIRICAL EVIDENCE
dc.subject EXCHANGE RATE DEVALUATION
dc.subject EXCHANGE RATE MANAGEMENT
dc.subject EXCHANGE RATE REGIME
dc.subject EXCHANGE RATES
dc.subject EXPORTS
dc.subject EXTERNAL DEBT
dc.subject EXTREME POVERTY
dc.subject EXTREME POVERTY LINE
dc.subject FISCAL ADJUSTMENT
dc.subject FISCAL BURDEN
dc.subject FISCAL COSTS
dc.subject FISCAL POLICY
dc.subject FIXED EXCHANGE RATE
dc.subject FOOD CONSUMPTION
dc.subject FOOD PRICE
dc.subject FOOD PRICES
dc.subject FOOD STAPLES
dc.subject FOREIGN CURRENCY
dc.subject FOREIGN EXCHANGE
dc.subject FOREIGN EXCHANGE EARNINGS
dc.subject FOREIGN INTEREST RATE
dc.subject FORMAL SAFETY NETS
dc.subject FORMAL SECTOR
dc.subject FORMAL SECTOR EMPLOYMENT
dc.subject GDP
dc.subject GDP DEFLATOR
dc.subject GOVERNMENT EXPENDITURES
dc.subject GOVERNMENT SPENDING
dc.subject GROSS DOMESTIC PRODUCT
dc.subject GROWTH RATE
dc.subject HOUSEHOLD BUDGET
dc.subject HOUSEHOLD CONSUMPTION
dc.subject HOUSEHOLD EXPENDITURE
dc.subject HOUSEHOLD INCOME
dc.subject HOUSEHOLD LEVEL
dc.subject HOUSEHOLD LEVEL DATA
dc.subject HOUSEHOLD SURVEY
dc.subject HOUSEHOLD SURVEYS
dc.subject IMPACT ON POVERTY
dc.subject IMPORT SUBSTITUTION
dc.subject INCIDENCE OF POVERTY
dc.subject INCOME DISTRIBUTION
dc.subject INCOME TAXES
dc.subject INDEXATION
dc.subject INFORMAL SECTOR
dc.subject INFORMAL TRANSFERS
dc.subject INSURANCE
dc.subject INTEREST RATE
dc.subject INTEREST RATES
dc.subject LABOR FORCE
dc.subject LABOR MARKET
dc.subject LABOR MARKETS
dc.subject LOCAL CURRENCY
dc.subject MARGINAL UTILITY
dc.subject MIDDLE EAST
dc.subject NATIONAL POVERTY
dc.subject NATIONAL POVERTY LINE
dc.subject NATURAL RESOURCES
dc.subject NOMINAL EXCHANGE RATE
dc.subject NORTH AFRICA
dc.subject PER CAPITA INCOME
dc.subject POLICY RESEARCH
dc.subject POOR
dc.subject POOR HOUSEHOLD
dc.subject POOR HOUSEHOLDS
dc.subject POVERTY INCIDENCE
dc.subject POVERTY LEVELS
dc.subject POVERTY POVERTY
dc.subject POVERTY REDUCTION
dc.subject PRIVATE CONSUMPTION
dc.subject PRIVATE INVESTMENT
dc.subject PRIVATE SECTOR
dc.subject PRODUCTION COSTS
dc.subject PUBLIC SECTOR
dc.subject PURCHASING POWER
dc.subject PURCHASING POWER PARITY
dc.subject REAL EXCHANGE
dc.subject REAL EXCHANGE RATE
dc.subject REAL GDP
dc.subject REAL GROWTH
dc.subject REAL INCOME
dc.subject REAL TERMS
dc.subject REAL WAGES
dc.subject RELATIVE PRICES
dc.subject RISING TREND
dc.subject RURAL
dc.subject RURAL AREA
dc.subject RURAL AREAS
dc.subject RURAL HOUSEHOLDS
dc.subject RURAL POOR
dc.subject RURAL POVERTY
dc.subject SAFETY NETS
dc.subject SAVINGS
dc.subject SCENARIOS
dc.subject SLOW GROWTH
dc.subject SOCIAL COSTS
dc.subject SOCIAL SAFETY NETS
dc.subject SOCIAL SECURITY
dc.subject SOCIAL SPENDING
dc.subject SOCIAL TRANSFERS
dc.subject STRONG APPRECIATION
dc.subject STRUCTURAL REFORMS
dc.subject SUB-SAHARAN AFRICA
dc.subject TAX REVENUES
dc.subject TELECOMMUNICATIONS
dc.subject TOTAL REVENUE
dc.subject TRADABLE GOODS
dc.subject UNEMPLOYMENT
dc.subject UNEMPLOYMENT RATE
dc.subject UTILITY FUNCTION
dc.subject WAGES
dc.subject WAR
dc.title Fiscal and Social Impact of a Nominal Exchange Rate Devaluation in Djibouti en
dspace.entity.type Publication
okr.doctype Publications & Research :: Policy Research Working Paper
okr.doctype Publications & Research
okr.docurl http://documents.worldbank.org/curated/en/2006/10/7111985/fiscal-social-impact-nominal-exchange-rate-devaluation-djibouti
okr.globalpractice Macroeconomics and Fiscal Management
okr.globalpractice Social, Urban, Rural and Resilience
okr.globalpractice Poverty
okr.identifier.doi 10.1596/1813-9450-4028
okr.identifier.externaldocumentum 000016406_20061005151500
okr.identifier.internaldocumentum 7111985
okr.identifier.report WPS4028
okr.language.supported en
okr.pdfurl http://www-wds.worldbank.org/external/default/WDSContentServer/WDSP/IB/2006/10/05/000016406_20061005151500/Rendered/PDF/wps4028.pdf en
okr.region.country Djibouti
okr.topic Economic Theory and Research
okr.topic Poverty Reduction :: Rural Poverty Reduction
okr.topic Macroeconomics and Economic Growth :: Macroeconomic Management
okr.topic Macroeconomics and Economic Growth :: Economic Stabilization
okr.topic Fiscal and Monetary Policy
okr.topic Rural Development
okr.unit Development Research Group (DECRG)
okr.volume 1 of 1
relation.isSeriesOfPublication 26e071dc-b0bf-409c-b982-df2970295c87
Files
Original bundle
Now showing 1 - 2 of 2
Thumbnail Image
Name:
English PDF
Size:
558.22 KB
Format:
Adobe Portable Document Format
Description:
No Thumbnail Available
Name:
English Text
Size:
168.85 KB
Format:
Plain Text
Description:
License bundle
Now showing 1 - 1 of 1
No Thumbnail Available
Name:
license.txt
Size:
1.71 KB
Format:
Plain Text
Description: