Towards an Exit from The Inflationary Crisis in Cameroon In the Context of The Russian-Ukrainian Conflict: Exploring the Channels of Public Transfers and Indirect Tax in A Computable General Equilibrium Model

Abstract

Rodrigue Nobosse Tchoffo, Severin Sezine Tchio, Claude Matsop Dounya and Guivis Zeufack Nkemgha

The objective of this article is to explore two instruments of state intervention to overcome the inflationary crisis caused by the Russian-Ukrainian conflict on the Cameroonian economy. This is the subsidy via a reduction in the indirect tax and public transfers to households. The study is based on a computable general equilibrium model (CGEM) built initial- ly by relaying some specificities related to its operation. This is calibrated on a 2016 social accounting matrix (SAM) so the data comes from the Eora database. Three basic scenarios are applied to the increase in the local price of imported products, in particular 5%, 10% and 12%. From these thresholds, we use welfare as a control instrument to determine the level of reduction applicable to the indirect tax as well as the share of government income that must be transferred to households. It emerges that fiscal policy turns out to be more effective than transfer policy.

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