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The Social Cost Of Foreign Exchange In An Economy With Trade Distortions And Differential Rates Of Domestic Taxation


  • Glenn Jenkins

    () (Queen's University, Kingston, On, Canada)


The need to calculate the shadow price of foreign exchange for economic project evaluation has been recognized for the same time in the case of developing countries. Most of these countries have large trade distortions, and in addition, often the project being evaluated will have a relatively significant impact on the country’s balance of payments either as a user or supplier of foreign exchange. In estimation the shadow price of foreign exchange, certain assumptions need to be made concerning the trade policies that the country will undertake during the period that the shadow exchange rate will be used. The model developed in this paper begins with the assumption that the present tax, tariff and subsidy distortions which have caused a divergence between the market and economic value of foreign exchange will remain in the future.

Suggested Citation

  • Glenn Jenkins, 1975. "The Social Cost Of Foreign Exchange In An Economy With Trade Distortions And Differential Rates Of Domestic Taxation," Development Discussion Papers 1975-03, JDI Executive Programs.
  • Handle: RePEc:qed:dpaper:16

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    foreign exchange; social cost; Canada;

    JEL classification:

    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate


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