Measuring the Foreign Exchange Premium and the Premium for Non‐Tradable Outlays for 20 Countries in Africa |
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| Authors: | Chun‐Yan Kuo Sener Salci Glenn P. Jenkins |
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| Affiliation: | 1. Department of Economics, Queen's University, Canada;2. Department of Economics, University of Birmingham, UK;3. Department of Economics, Eastern Mediterranean University, Turkey North Cyprus |
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| 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. |
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| Keywords: | D58 H23 H43 O55 P45 R13 Shadow exchange rate foreign exchange premium premium for non‐tradable outlays tradable goods trade distortions taxes subsidies Africa |
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