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Exchange rate policy and devaluation in Malawi:


  • Pauw, Karl
  • Dorosh, Paul A.
  • Mazunda, John


This study demonstrates why devaluation was ultimately necessary in Malawi and also what its eventual impact might be in terms of prices, income distribution, and domestic production. Our approach is to use a computable general equilibrium (CGE) model to evaluate the economywide impacts of foreign exchange shortages in Malawi under two alternative exchange rate regimes. The foreign exchange shortages are modeled by simulating the effect of actual shocks, including tobacco price declines and reductions in direct budgetary support or foreign direct investments. We then evaluate the economy’s response to these shocks under a fixed exchange rate regime and a flexible exchange rate regime.

Suggested Citation

  • Pauw, Karl & Dorosh, Paul A. & Mazunda, John, 2013. "Exchange rate policy and devaluation in Malawi:," IFPRI discussion papers 1253, International Food Policy Research Institute (IFPRI).
  • Handle: RePEc:fpr:ifprid:1253

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    Cited by:

    1. C. Larochez-Dupraz & M. Huchet-Bourdon, 2016. "Agricultural support and vulnerability of food security to trade in developing countries," Food Security: The Science, Sociology and Economics of Food Production and Access to Food, Springer;The International Society for Plant Pathology, vol. 8(6), pages 1191-1206, December.
    2. Mutenje, Munyaradzi Junia & Farnworth, Cathy Rozel & Stirling, Clare & Thierfelder, Christian & Mupangwa, Walter & Nyagumbo, Isaiah, 2019. "A cost-benefit analysis of climate-smart agriculture options in Southern Africa: Balancing gender and technology," Ecological Economics, Elsevier, vol. 163(C), pages 126-137.
    3. Henry Kankwamba & Mariam Kadzamira & Karl Pauw, 2018. "How diversified is cropping in Malawi? Patterns, determinants and policy implications," Food Security: The Science, Sociology and Economics of Food Production and Access to Food, Springer;The International Society for Plant Pathology, vol. 10(2), pages 323-338, April.
    4. Karl Pauw & Ulrik Beck & Richard Mussa, 2014. "Did Rapid Smallholder-Led Agricultural Growth Fail to Reduce Rural Poverty?: Making Sense of Malawi's Poverty Puzzle," WIDER Working Paper Series wp-2014-123, World Institute for Development Economic Research (UNU-WIDER).
    5. World Bank, 2016. "Malawi Urbanization Review," World Bank Publications - Reports 24391, The World Bank Group.
    6. Montfaucon, Angella Faith & Sato, Kiyotaka & Shrestha, Nagendra & Parsons, Craig, 2021. "Exchange rate pass-through and invoicing currency choice between fixed and floating exchange rate regimes: Evidence from Malawi’s transaction-level data," Economic Analysis and Policy, Elsevier, vol. 72(C), pages 562-577.
    7. Pauw, Karl & Beck, Ulrik & Mussa, Richard, 2014. "Did rapid smallholder-led agricultural growth fail to reduce rural poverty? Making sense of Malawi's poverty puzzle," WIDER Working Paper Series 123, World Institute for Development Economic Research (UNU-WIDER).
    8. Hakeem Eltalla, 2013. "Devaluation and Output Growth in Palestine: Evidence from a CGE model," European Journal of Business and Economics, Central Bohemia University, vol. 8(4), pages 4221:8-4221, May.
    9. Aberman, Noora-Lisa & Edelman, Brent, 2014. "Challenges to Soya Export Promotion in Malawi: an Application of Net-Map in International Trade and Policy Reform," Conference papers 332472, Purdue University, Center for Global Trade Analysis, Global Trade Analysis Project.
    10. Joseph Chukwudi Odionye & Jude Okechukwu Chukwu, 2021. "The Asymmetric Effects Of Currency Devaluation In Selected Sub-Saharan Africa," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 66(230), pages 135-156, July – Se.
    11. Greenwell Collins Matchaya & Pius Chilonda & Sibusiso Nhelengethwa, 2013. "International Trade and Income in Malawi: A Co-integration and Causality Approach," International Journal of Business and Economic Sciences Applied Research (IJBESAR), International Hellenic University (IHU), Kavala Campus, Greece (formerly Eastern Macedonia and Thrace Institute of Technology - EMaTTech), vol. 6(2), pages 125-147, September.

    More about this item


    exchange rate; Devaluation of currency; foreign exchange rationing; Currencies; Computable General Equilibrium (CGE) model; Economic policy;
    All these keywords.

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