Chapter

The Welfare Effects of a Large Depreciation: the Case of Egypt 2000–2005

Hanaa Kheir-El-Din

in The Egyptian Economy

Published by American University in Cairo Press

Published in print April 2008 | ISBN: 9789774161544
Published online September 2011 | e-ISBN: 9781617970306 | DOI: http://dx.doi.org/10.5743/cairo/9789774161544.003.0004
The Welfare Effects of a Large Depreciation: the Case of Egypt 2000–2005

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Between 2000 and 2005 Egypt experienced a large nominal depreciation of the Egyptian pound, much of it concentrated around a sharp decline in early 2003. This chapter assesses the welfare implications of the large changes in consumer prices that accompanied this movement in the exchange rate. It shows a significant and very heterogeneous relationship across products, and a degree of pass-through from the exchange rate to consumer prices. On average, the welfare cost of these price changes was 7.4% of households' initial expenditure. Since estimated pass-through for food items was significantly greater than for non-food items, the effects of the depreciation disproportionately affected poor households.

Keywords: Egyptian economy; depreciation; consumer prices; exchange rates; welfare costs; poor households

Chapter.  8600 words.  Illustrated.

Subjects: Political Economy

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