Principles of Applied Equilibrium Modelling: A Case Study of the Cameroon Economy

This paper describes the principles of applied computable general equilibrium modelling and the application of a two sector model to the Cameroon economy. An overview is given of the economic situation and performance of Cameroon together with a background summary of the application by Maxwell Stamp of computable general equilibrium models (CGEMs) to policy analysis in industrialising countries. A brief description is made, with reference to the Cameroon multisector equilibrium model, of the theoretical basis, typical structure and key assumptions of a CGEM. A critical explanation of the modelling methodology is then given. The structure and rationale for a two sector model is presented with detailed model equations and the associated data requirements. The model is then used, with national accounts data, to conduct comparative static experiments of the impact of different policy interventions on economic activity and the real exchange rate in Cameroon.