The Distributional Consequences of Large Devaluations

Javier Cravino and Andrei Levchenko

No 23409, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study the impact of large exchange rate devaluations on the cost of living at different points on the income distribution. Poor households spend relatively more on tradeable product categories, and consume lower-priced varieties within categories. Changes in the relative price of tradeables and of lower-priced varieties affect the cost of living of low-income relative to high-income households. We quantify these effects following the 1994 Mexican devaluation and show that they can have large distributional consequences. Two years post-devaluation, the cost of living for the bottom income decile rose 1.48 to 1.62 times more than for the top income decile.

JEL-codes: F31 F61 (search for similar items in EconPapers)
Date: 2017-05
New Economics Papers: this item is included in nep-mon and nep-opm
Note: IFM ITI
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Citations: View citations in EconPapers (60)

Published as Javier Cravino & Andrei A. Levchenko, 2017. "The Distributional Consequences of Large Devaluations," American Economic Review, vol 107(11), pages 3477-3509.

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Related works:
Journal Article: The Distributional Consequences of Large Devaluations (2017)
Working Paper: The Distributional Consequences of Large Devaluations (2017)
Working Paper: The distributional consequences of large devaluations (2016)
Working Paper: The Distributional Consequences of Large Devaluations (2015)
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