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A firm's-eye view of policy and fiscal reforms in Cameroon

Author

Listed:
  • Gauthier, Bernard
  • Soloaga, Isidro
  • Tybout, James

Abstract

After decades of heavy trade restrictions, fiscal distortions, and currency overvaluation, Cameroon implemented important commercial and fiscal policy reforms. Almost simultaneously, a major CFA devaluation cut the international price of Cameroon's currency in half. The authors examine the effects of these reforms on the incentive structure that manufacturing firms face. Did they create a coherent set of new signals? Was the net effect to stimulate the production of tradable goods? Was the dispersion of tax burdens lessened? They address each of these questions using a cost function decomposition applied to detailed firm-level panel data. They observe that Cameroon's reforms appear to have sent clear new signals to manufacturers, as the effective rate of protection fell by between 80 and 120 percentage points. Unlike trade liberalization, neither tax reforms nor the CFA devaluation had a major systemic effect on profit margins. But the CFA devaluation did twist relative prices dramatically in favor of exportable goods, so export-oriented firms exhibited rapid output growth.

Suggested Citation

  • Gauthier, Bernard & Soloaga, Isidro & Tybout, James, 2000. "A firm's-eye view of policy and fiscal reforms in Cameroon," Policy Research Working Paper Series 2442, The World Bank.
  • Handle: RePEc:wbk:wbrwps:2442
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    References listed on IDEAS

    as
    1. Head, Keith & Ries, John, 1999. "Rationalization effects of tariff reductions," Journal of International Economics, Elsevier, vol. 47(2), pages 295-320, April.
    2. Bela Balassa, 1965. "Tariff Protection in Industrial Countries: An Evaluation," Journal of Political Economy, University of Chicago Press, vol. 73, pages 573-573.
    3. Sofronis K. Clerides & Saul Lach & James R. Tybout, 1998. "Is Learning by Exporting Important? Micro-Dynamic Evidence from Colombia, Mexico, and Morocco," The Quarterly Journal of Economics, Oxford University Press, vol. 113(3), pages 903-947.
    4. Richard Baldwin & Paul Krugman, 1989. "Persistent Trade Effects of Large Exchange Rate Shocks," The Quarterly Journal of Economics, Oxford University Press, vol. 104(4), pages 635-654.
    5. Hopenhayn, Hugo & Rogerson, Richard, 1993. "Job Turnover and Policy Evaluation: A General Equilibrium Analysis," Journal of Political Economy, University of Chicago Press, vol. 101(5), pages 915-938, October.
    6. Tybout, James, et al, 1997. "Firm-Level Responses to the CFA Devaluation in Cameroon," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 6(1), pages 3-34, March.
    7. repec:mes:challe:v:31:y:1988:i:4:p:56-58 is not listed on IDEAS
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