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

See all articles by Glenn P. Jenkins

Glenn P. Jenkins

Queen's University - Department of Economics; Eastern Mediterranean University

Chun Yan Kuo

Queen's University - Department of Economics

Sener Salci

Queen's University - Department of Economics

Date Written: July 16, 2014

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 2.50% 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

Suggested Citation

Jenkins, Glenn P. and Kuo, Chun Yan and Salci, Sener, Measuring the Foreign Exchange Premium and the Premium for Non-Tradable Outlays for Twenty Countries in Africa (July 16, 2014). South African Journal of Economics, 83(2), p.269-28, 2015, Available at SSRN: https://ssrn.com/abstract=2759629

Glenn P. Jenkins

Queen's University - Department of Economics ( email )

99 University Avenue
Kingston K7L 3N6, Ontario
Canada K7L 3N6
613 533 6556 (Phone)
613 533 6818 (Fax)

Eastern Mediterranean University

Gazimagusa, Mersin 10
Turkey

Chun Yan Kuo

Queen's University - Department of Economics ( email )

99 University Avenue
Kingston K7L 3N6, Ontario
Canada K7L 3N6

Sener Salci (Contact Author)

Queen's University - Department of Economics ( email )

99 University Avenue
Kingston K7L 3N6, Ontario
Canada

HOME PAGE: http://sites.google.com/site/senersalci/

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