Who Bears the Cost of Devaluation? Price Dynamics and Welfare Impacts During Bolivia’s 2024-2025 Currency Crisis

Werner L. Hernani-Limarino
Additional contact information
Werner L. Hernani-Limarino: Academia Boliviana de Ciencias Económicas (ABCE)

Revista Latinoamericana de Desarrollo Economico, 2025, vol. 23, issue 44, 11-63

Abstract: This paper dissects the asymmetric price and welfare consequences of Bolivia’s de facto 60% exchange rate devaluation using high-frequency scanner data from a national supermarket chain. Despite no formal float, consumer prices rose by 15% –with imported goods jumping 16.8% and domestic goods lagging at 9.2%. The inflation burden fell unevenly: while the cost of high-income households’ baskets increased more (17.6%), their superior substitution elasticity allowed them to buffer welfare losses to 10.9% by shifting toward cheaper or newly available alternatives. In contrast, low-income households faced smaller price increases (14.5%) but larger welfare losses (13.4%) due to low substitutability and rigid consumption patterns tied to essential imported staples.

Keywords: Currency devaluation; Exchange rate pass-through; Cost of living; Welfare impacts; Distributional effects; CES demand system; Bolivia (search for similar items in EconPapers)
JEL-codes: D12 F33 F41 F61 O54 (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
https://iisec.ucb.edu.bo/publicacion/who-bears-the ... 2025-currency-crisis Full text

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ris:revlde:022038

DOI: 10.35319/lajed.202544558

Access Statistics for this article

Revista Latinoamericana de Desarrollo Economico is currently edited by Carlos Gustavo Machicado

More articles in Revista Latinoamericana de Desarrollo Economico from Carrera de Economía de la Universidad Católica Boliviana (UCB) Universidad Católica Boliviana. Contact information at EDIRC.
Bibliographic data for series maintained by Carlos Gustavo Machicado ().