Measuring the Foreign Exchange Premium and the Premium for Non-Tradable Outlays for Twenty Countries in Africa
South African Journal of Economics, 83(2), p.269-28, 2015
31 Pages Posted: 9 Apr 2016
Date Written: July 16, 2014
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 2.50% to 9.25% and the premium for non-tradable outlays from −1.00% to 2.40%. 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.
Keywords: Distortions, Taxes, Subsidies, Foreign Exchange Premium, Premium for Non-Tradable Outlays, Tradable Goods, Africa
JEL Classification: D58, H23, H43, O55, P45, R13
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