posted on 2024-09-05, 22:38authored byDominique Njinkeu, Ernest Bamou
This paper uses a computable general equilibrium model consistent with stylized facts
about Cameroon to assess the impact of the 1994 regional fiscal reform. Two main
elements characterize this model: it accounts for the asymmetric impact with trading
partners and the dualism on product and factor markets through due consideration of
both formal and informal sector's activities. Price formation in the model is standard,
except that import prices are adjusted to take into account tax evasion and smuggling.
Our analysis focuses on the macroeconomic impact and the welfare implications of the
simulations. Overall, the various simulations lead to higher economic growth and
expansion in employment. However, depending on the combination of taxes used, the
sectoral effects are different. As a member of the CFA zone Cameroon can achieve a real
depreciation on an individual basis through stringent fiscal and monetary policies or
through a uniform tariff-cum-subsidy (UTCS) scheme, which is obtained via subsidies
to selected export crops and high import tariffs. The simulation of this policy scenario
leads to an increase in GDP at factor cost, while employment increases at a higher rate
than in other scenarios; hence the unemployment rate falls and households' welfare
increases. All households are better off in this simulation, although in the formal household
category, welfare increased by a lesser amount.
History
Publisher
African Economic Research Consortium
Citation
Njinkeu, Dominique and Ernest Bamou (2000) Trade and exchange rate policy options for the CFA countries : simulations with a CGE model for Cameroon. AERC research paper 96, Nairobi : AERC