The Effects of Trade Tariffs on Inflation in Cameroon in the Context of Exchange Rate Dynamics
Keywords:
Import Tariffs, Export Tariffs, Inflation, Exchange RateAbstract
This study investigates the impact of trade tariffs on inflation in Cameroon, with a particular focus on the moderating role of exchange rates, using data from 1990 to 2022. By employing the Autoregressive Distributed Lag (ARDL) estimation technique, the study examines how both import and export tariffs influence inflation dynamics. The findings reveal a significant long-run relationship among the variables at the 1% significance level. Specifically, export tariffs demonstrate a strong positive association with inflation in both the short and long run, whereas import tariffs exhibit a negative but statistically insignificant effect. Moreover, exchange rates are found to have a negative correlation with inflation, suggesting that currency fluctuations play a crucial role in shaping price stability. With regard to the moderating effect, the results indicate that exchange rates influence inflation through the import tariff channel, although this effect is statistically insignificant. Based on these insights, the study recommends that the Cameroonian government consider increasing import tariffs as part of its import substitution policy. Raising import tariffs could reduce reliance on foreign goods, thereby helping to curb inflationary pressures driven by imported inflation. Additionally, given that export tariffs contribute to inflation, policymakers should assess the possibility of lowering export duties. Reducing these tariffs would enhance the competitiveness of Cameroonian goods in global markets, stimulate higher productivity, and ultimately alleviate inflationary pressures.
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