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Measuring The Foreign Exchange Premium And The Premium For Non-Tradable Outlays For Twenty Countries In Africa

Author

Listed:
  • Glenn P. Jenkins

    (Department of Economics, Queen's University, Canada, Eastern Mediterranean University, Mersin 10, Turkey)

  • Chun-Yan Kuo

    (Queen's University, Canada)

  • Sener Salci

    (Department of Economics, University of Birmingham, UK)

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 4.00% to 9.50% and the premium for non-tradable outlays from -1.75% to 1.50%. 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

  • Glenn P. Jenkins & Chun-Yan Kuo & Sener Salci, 2013. "Measuring The Foreign Exchange Premium And The Premium For Non-Tradable Outlays For Twenty Countries In Africa," Development Discussion Papers 2013-05, JDI Executive Programs.
    • Handle: RePEc:qed:dpaper:229
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    References listed on IDEAS

    as
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    3. 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.
    4. Arnold C. Harberger, 1967. "Techniques of Project Appraisal," NBER Chapters, in: National Economic Planning, pages 131-152, National Bureau of Economic Research, Inc.
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    7. Batra, Raveendra N & Guisinger, Stephen, 1974. "A New Approach to the Estimation of the Shadow Exchange Rate in Evaluating Development Projects in Less Developed Countries," Oxford Economic Papers, Oxford University Press, vol. 26(2), pages 192-207, July.
    8. International Monetary Fund, 2010. "Democratic Republic of the Congo: Statistical Appendix," IMF Staff Country Reports 2010/011, International Monetary Fund.
    9. 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.
    10. Fane, George, 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(199), pages 307-316, December.
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    More about this item

    Keywords

    Distortions; taxes; subsidies; foreign exchange premium; premium for non-tradable outlays; tradable goods; Africa;
    All these keywords.

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • H23 - Public Economics - - Taxation, Subsidies, and Revenue - - - Externalities; Redistributive Effects; Environmental Taxes and Subsidies
    • H43 - Public Economics - - Publicly Provided Goods - - - Project Evaluation; Social Discount Rate
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa
    • P45 - Political Economy and Comparative Economic Systems - - Other Economic Systems - - - International Linkages
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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