between importables and exportables is important, because of the changes terms of trade that occurred at the same time as the devaluation, and also because of differences in domestic taxes on importables and exportables.

As we discuss below, on the price side, the evidence shows that there was relatively little difference in the increase in the prices of tradable and nontradable consumer goods. Thus, one would not expect that the impact of the devaluation would vary significantly among socioeconomic groups. The relatively similar composition of their consumption baskets would also tend to reduce differences in the impact of the devaluation. The impact of the devaluation on real incomes earned from production of exportables and nontradable goods (or wages in these sectors) is likely to be a far more important determinant of how different households fared. This section looks at some of the theory and evidence for what we would expect to have happened on the consumer price and income side, and then compares the expected outcomes with the household survey results based on the 1993 and 1995 surveys.

# Devaluation, inflation, **and the** implications **for poverty**

CMte d'Ivoire was among the more successful of the CFA franc zone countries in containing inflation following the devaluation of the CFA franc by 100 percent in local currency terms. In 1994, inflation (based on the blue collar consumer price index) at the end of the first year following the devaluation was 32 percent. At end 1995, prices had risen a total of 44 percent since the devaluation. The relatively low rate of overall inflation was due to imported prices rising less than would be expected assuming a simple doubling of prices in local currency, to the small rise in wages, and also to the subsidies on rice consumption which accounts for 5 percent of the consumption basket.

As Leenhardt and Massuyeau (1995) point out, there was not, however, a large difference in the behavior of prices of consumer tradable and nontradable goods. 1<sup>3</sup> They found a difference of ten percentage points in the tradable (largely imported consumed goods) and nontradable consumer price index between the period December 1993 to December 1994. **14** Based on a similar classification of the CPI, we found that the price index for tradable goods, which account for 46.5 percent of the CPI (table 12), rose 155 percent between December 1993 and April 1995, while the price index for nontradable goods rose 140 percent (table 13).'5 This difference would be even smaller if one were to use the expenditure shares generated by the survey results.'<sup>6</sup> 13 This should not be interpreted to mean that the real exchange rate did not depreciate signi.ficantly. The tradable component of the CPI is comprised of goods that are primarily imported or goods that are domestically produced close substitutes for imported goods. The CPI-based price index for tradable goods in all likelihood does not accurately the index of prices of all imports, including capital and intermediate goods, that would be used in computing the internal real exchange rate for imports. The closest comparison to the calculation based on CPI tradable and nontradable price indices would be the estimate of the internal real exchange rate for imports, valued at domestic prices relative to the price of nontraded goods. This is not the same as the change in the internal real exchange rate based on an index of traded good prices, where traded goods comprise both imports and exports. The change in the real effectiv **e** xchange rate between 1993 and 1995 was 33 percent. For a discussion of the interpretation and calculation of these different measures of the real exchange rate, see Hinkle and Nsengiyumva (1995a and 1995b).

14 Locally grown cereals and starchy crops were classified as nontradables.

> 15 Household expenditures were divided into domestic and traded goods following the classification of Grootaert (1996). Most food products (except meat, rice, wheat products, milk products, sugar, salt, tomato paste, bouillon cubes, refined oils and drinks, vehicles and gasoline) and all services were classified as domestic goods, while purchased household goods, drugs, and clothing were classified as tradables.

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