Kojo, Naoko C.Ivaschenko, Oleksiy2015-08-172015-08-172006-02https://hdl.handle.net/10986/22423This 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.en-USCC BY 3.0 IGOTARIFFSTOTAL REVENUEDURABLE GOODSFOREIGN CAPITALWORLD TRADE ORGANIZATIONPRODUCTIONADVERSE IMPACTSSTOCKFISCAL DEFICITSINCOMEINTERESTEXPECTATIONSREAL GDPEXCHANGEBALANCE OF PAYMENTSMACROECONOMIC POLICYCONSUMER GOODSGDP PER CAPITALIQUIDITYDEVELOPING COUNTRIESEXPORTSWELFARE SYSTEMTAX COLLECTIONREPAYMENTSBLACK MARKETECONOMIC STRUCTUREFISCAL POLICYWELFAREDEVALUATIONEQUILIBRIUMVARIABLESTAXREAL INCOMEINPUTSPAYMENTSWEALTHINFORMATION SYSTEMSCREDITORSINFLATIONPENSIONSAFETY NETSBUDGETCONVERSIONLABOR MARKETINFLUENCETRADE BALANCEOIL PRICESDERIVATIVESDEMAND FOR MONEYCURRENCYEXPORT GROWTHCONTRACTSINFLATIONARY PRESSURESFINANCESMACROECONOMIC MODELSEXCHANGE RATESOPTIONSMONOPOLYEQUIPMENTSDEBTINFLATIONARY PRESSUREHOUSEHOLD INCOMERETURNDEFICITSINFLATION RATECONSUMPTION EXPENDITUREEXCESS LIQUIDITYINTERNATIONAL ECONOMICSDOMESTIC DEBTLOANSDIRECT INVESTMENTRESERVESUTILITYHOUSEHOLD WEALTHFOREIGN CURRENCYPRODUCTION INPUTSBANK POLICYPUBLIC INVESTMENTEXPENDITUREEQUILIBRIUM ANALYSISUNEMPLOYMENTDEREGULATIONCONSUMPTIONBUDGET CONSTRAINTINCOME SECURITYCAPITAL OUTLAYSGOODWAGESCOUPONSFINANCIAL CRISISFOREIGN FINANCINGFUTUREVALUEPENSIONSWAGE RATESCOMPETITIVENESSFOREIGN DIRECT INVESTMENTRETURNSCREDITMACROECONOMICSPURCHASING POWERDEMANDGOVERNMENT EXPENDITUREUTILITY FUNCTIONINVESTMENT PROJECTSAGGREGATE DEMANDPRICE CHANGESECONOMYCONSUMERSEXCESS DEMANDEXPENDITURESPROPERTYCURRENCY DEVALUATIONTAX RATESREAL EXCHANGE RATEMARKETDEFAULTBENCHMARKFOREIGN EXCHANGETRADE LIBERALIZATIONINCOME EFFECTPRODUCTION FUNCTIONBALANCE OF PAYMENTTREASURYMACROECONOMIC VARIABLESHOLDINGSGOVERNMENT DEBTGOVERNMENT POLICIESPARTIAL EQUILIBRIUM ANALYSISMACROECONOMIC SHOCKSECONOMIC DEVELOPMENTTRADEMACROECONOMIC VARIABLEGDPGOODSGENERAL EQUILIBRIUM ANALYSISGLOBAL TRADESECURITYTRANSFER PAYMENTSDURABLEGROWTH RATESUBSTITUTION EFFECTINVESTMENTPRICE CEILINGSBONDSHAREPUBLIC FINANCESPOVERTYADVERSE IMPACTFOREIGN INTERESTADVERSE EFFECTCAPITAL INFLOWSGINI COEFFICIENTREVENUEPROFITPUBLIC SECTOR DEBTMACROECONOMIC POLICIESEXCHANGE RATEINSTRUMENTREMITTANCESPUBLIC SPENDINGPRICE CONTROLSARREARSCAPITAL FLIGHTADVERSE EFFECTSPRICESEXTERNAL BORROWINGDEVELOPMENT POLICYWorking PaperWorld Bank10.1596/22423