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Measuring the Foreign Exchange Premium and the Premium for Non-Tradable Outlays for 20 Countries in Africa

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  • Chun-Yan Kuo
  • Sener Salci
  • Glenn P. Jenkins

Abstract

In this paper, we develop an analytical general equilibrium framework to measure the foreign exchange premium and the premium for non-tradable outlays for a country. The framework allows us to capture in a consistent manner the impacts of the sourcing of funds and their expenditure on tradable and non-tradable goods and services of investment projects. An application of the model is carried out for 20 countries in Africa. The results show that the foreign exchange premiums range from 2.4% to 9.0% and the premium for non-tradable outlays from −0.7% to 2.9%. The empirical values depend on a number of factors, including the indirect taxes, production subsidies and international trade distortions of a country. These premiums should be incorporated into the economic evaluation of investment projects.

Suggested Citation

  • Chun-Yan Kuo & Sener Salci & Glenn P. Jenkins, 2015. "Measuring the Foreign Exchange Premium and the Premium for Non-Tradable Outlays for 20 Countries in Africa," South African Journal of Economics, Economic Society of South Africa, vol. 83(2), pages 269-285, June.
    • Handle: RePEc:bla:sajeco:v:83:y:2015:i:2:p:269-285
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    File URL: http://hdl.handle.net/10.1111/saje.12068
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    References listed on IDEAS

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    1. Arnold C Harberger & Glenn P Jenkins & Chun‐Yan Kuo & M Benjamin Mphahlele, 2003. "The Economic Cost of Foreign Exchange for South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 71(2), pages 155-169, June.
    2. George Fane, 1991. "The Social Opportunity Cost of Foreign Exchange: A Partial Defence of Harberger et al," The Economic Record, The Economic Society of Australia, vol. 67(4), pages 307-316, December.
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    4. Boskin, Michael J, 1978. "Taxation, Saving, and the Rate of Interest," Journal of Political Economy, University of Chicago Press, vol. 86(2), pages 3-27, April.
    5. Glenn P. Jenkins, 1981. "The Public-Sector Discount Rate for Canada: Some Further Observations," Canadian Public Policy, University of Toronto Press, vol. 7(3), pages 399-407, Summer.
    6. Jenkins, Glenn P. & Kuo, Chun-Yan, 2000. "A VAT Revenue Simulation Model for Tax Reform in Developing Countries," World Development, Elsevier, vol. 28(4), pages 763-774, April.
    7. David F. Burgess, 1981. "The Social Discount Rate for Canada: Theory and Evidence," Canadian Public Policy, University of Toronto Press, vol. 7(3), pages 383-394, Summer.
    8. Glenn P. Jenkins & Chun-Yan Kuo, 1985. "On Measuring the Social Opportunity Cost of Foreign Exchange," Canadian Journal of Economics, Canadian Economics Association, vol. 18(2), pages 400-415, May.
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    10. Chun-Yan Kuo & Thomas Mcgirr & Satya Poddar, 1988. "Measuring the Non-Neutralities of Sales and Excise Taxes in Canada," Development Discussion Papers 1988-08, JDI Executive Programs.
    11. Blitzer, Charles & Dasgupta, Partha & Stiglitz, Joseph, 1981. "Project Appraisal and Foreign Exchange Constraints," Economic Journal, Royal Economic Society, vol. 91(361), pages 58-74, March.
    12. Balassa, Bela, 1974. "Estimating the Shadow Price of Foreign Exchange in Project Appraisal," Oxford Economic Papers, Oxford University Press, vol. 26(2), pages 147-168, July.
    13. Chun‐Yan Kuo & Glenn P. Jenkins & M. Benjamin Mphahlele, 2003. "The Economic Opportunity Cost Of Capital In South Africa," South African Journal of Economics, Economic Society of South Africa, vol. 71(3), pages 523-543, September.
    14. Michael J. Boskin, 1978. "Taxation, Saving, and the Rate of Interest," NBER Chapters, in: Research in Taxation, pages 3-27, National Bureau of Economic Research, Inc.
    15. World Bank, 2010. "World Development Indicators 2010," World Bank Publications - Books, The World Bank Group, number 4373, April.
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    Cited by:

    1. Salci, Sener & Jenkins, Glenn, 2016. "An Economic and Stakeholder Analysis for the Design of IPP Contracts for Wind Farms," MPRA Paper 70578, University Library of Munich, Germany.
    2. Salci, Sener, 2017. "An Integrated Appraisal of the Péligre Electricity Transmission Line Rehabilitation Investment," MPRA Paper 78929, University Library of Munich, Germany.
    3. Salci, Sener & Jenkins, Glenn P., 2018. "An economic analysis for the design of ipp contracts for grid-connected renewable energy projects," Renewable and Sustainable Energy Reviews, Elsevier, vol. 81(P2), pages 2410-2420.
    4. Mikhail Miklyaev & Shahryar Afra & Melani Schultz, 2017. "Cost-Benefit Analysis of Rwanda’s Dairy Value Chains," Development Discussion Papers 2017-02, JDI Executive Programs.
    5. Precious Paul Adesina, 2019. "Integrated Investment Appraisal of Water and Sanitation Projects: A Case of Senegal Water and Sanitation Project," Development Discussion Papers 2019-07, JDI Executive Programs.
    6. Mikhail Miklyaev & Majid Hashemi & Melani Schultz, 2017. "Cost Benefit Analysis of Senegal’s Rice Value Chains," Development Discussion Papers 2017-04, JDI Executive Programs.
    7. Mikhail Miklyaev & Shahryar Afra & Melani Schultz & Adeline Awantang & Mathilde Laval, 2017. "Cost Benefit Analysis of Mali’s Sorghum and Millet Value Chains," Development Discussion Papers 2017-03, JDI Executive Programs.
    8. Osama Ahmed & Walid Sallam, 2020. "Assessing the Potential of Improving Livelihoods and Creating Sustainable Socio-Economic Circumstances for Rural Communities in Upper Egypt," Sustainability, MDPI, vol. 12(16), pages 1-23, August.
    9. Mikhail Miklyaev & Glenn Jenkins & David Shobowale, 2020. "Sustainability of Agricultural Crop Policies in Rwanda: An Integrated Cost–Benefit Analysis," Sustainability, MDPI, vol. 13(1), pages 1-21, December.
    10. Salci, Sener & Jenkins, Glenn, 2016. "An Economic and Stakeholder Analysis for the Design of IPP Contracts for Wind Farms," MPRA Paper 70578, University Library of Munich, Germany.

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