Trade liberalization and economic performance of Cameroon and Gabon : a comparative analysis with CGE model

Abstract

The paper uses a computable general equilibrium model to analyse and compare the impact of the fiscal reform proposed in the Central African Economic and Monetary Union (CEMAC), within the framework of trade liberalization program, on the economic performances and welfare of the population of Cameroon and Gabon. The simulations carried out show that the reform had different effects on the two economies. In Cameroon, the government's fiscal objectives were achieved to the detriment of both production and population welfare. In Gabon, the shortfall in the government's fiscal revenue was compensated for by increased production, which results in the population's improved welfare. The application of the reform, in view of increasing fiscal revenue in the two countries, generated negative effects on production and welfare. Nevertheless, using the surplus fiscal revenue generated to increase public spending, which has strong correlation with the household revenue, can attenuate these effects. Tree economic policy implications can be derived from the study: Gabon needs not to be afraid of the fiscal impact of the liberal fiscal reform proposed by the sub-regional authorities, the revamping of the economy through public works financed by increased fiscal pressure can be envisaged for both Cameroon and Gabon and the coordination of trade policy between these two countries is not possible without a harmonization of their macroeconomic objectives.