How Do Industrial Enterprises Respond to Policy Reforms? Supply Response in Cameroon
Between 1986 and 1993, adverse terms of trade shocks combined with a rigidly pegged nominal exchange rate and various domestic distortions to reduce Cameroon's per capita income by roughly 50 percent. Though major policy reforms were slow to c...
| Main Authors: | , , , |
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| Format: | Brief |
| Language: | English |
| Published: |
World Bank, Washington, DC
2012
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/1997/05/12862024/industrial-enterprises-respond-policy-reforms-supply-response-cameroon http://hdl.handle.net/10986/9932 |
| Summary: | Between 1986 and 1993, adverse terms of
trade shocks combined with a rigidly pegged nominal exchange
rate and various domestic distortions to reduce
Cameroon's per capita income by roughly 50 percent.
Though major policy reforms were slow to come, the Chartered
Financial Analyst (CFA) franc was finally devalued in 1994.
A study conducted on more than 200 manufacturing enterprises
in Cameroon, before and after devaluation and reforms. The
1994 devaluation of the CFA franc dramatically increased the
price of imported intermediate goods. This increase in costs
was large enough to substantially reduce profits at some
firms, particularly those that were heavily dependent upon
imported intermediates. However, at firms using domestic
inputs, and especially at firms producing exportable goods,
the increase in input costs was more than offset by rising
output prices, and profit margins improved. Labor costs rose
by roughly the rate of inflation overall, so they went up
relative to output prices in non-traded goods sectors, and
fell relative to output prices in others. |
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