Not logged in.

Contribution Details

Type Working Paper
Scope Discipline-based scholarship
Title The distributional consequences of large devaluations
Organization Unit
  • Javier Cravino
  • Andrei A Levchenko
  • English
Institution University of Zurich
Series Name UBS Center Working Paper Series
Number 15
ISSN 2296-2778
Number of Pages 47
Date 2016
Abstract Text We study the differential impact of large exchange rate devaluations on the cost of living at different points on the income distribution. Across product categories, the poor have relatively high expenditure shares in tradeable products. Within tradeable product categories, the poor consume lower-priced varieties. Changes in the relative price of tradeables and the relative prices of lower-priced varieties following a devaluation will affect the cost of the consumption basket of the low-income households relative that of the high-income households. We quantify these effects following the 1994 Mexican peso devaluation and show that their distributional consequences can be large. In the two years that follow the devaluation, the cost of the consumption basket of those in the bottom decile of the income distribution rose between 1.46 and 1.6 times more than the cost of the consumption basket for the top income decile.
Official URL
Related URLs
PDF File Download from ZORA
Export BibTeX
Keywords Exchange rates, large devaluations, distributional effects, consumption baskets