Pre‐Commitment Mechanism and Policy Credibility in African Trade Reform

15 Pages Posted: 29 Jan 2016

See all articles by Sylvain Boko

Sylvain Boko

affiliation not provided to SSRN

Harvey E. Lapan

Iowa State University - Department of Economics

Date Written: February 2001

Abstract

In the absence of a binding pre‐commitment mechanism, a government has an incentive to renege on announced policy. This is a well‐established result in the literature. The paper applies this theory to tariff policy by developing a two‐game model to analyze the credibility of government tariff reform announcements. The pre‐commitment solution is subgame‐imperfect; therefore, government’s announcement of tariff reforms is time‐inconsistent. Using a sample of African countries operating under IMF structural adjustment programs, the study finds only weak evidence that countries implemented their announced tariff reforms. However, SAP agreements seem to enhance private sector confidence in government reforms.

Suggested Citation

Boko, Sylvain and Lapan, Harvey E., Pre‐Commitment Mechanism and Policy Credibility in African Trade Reform (February 2001). Review of Development Economics, Vol. 5, Issue 1, pp. 25-39, 2001, Available at SSRN: https://ssrn.com/abstract=2724259 or http://dx.doi.org/10.1111/1467-9361.00104

Sylvain Boko (Contact Author)

affiliation not provided to SSRN

Harvey E. Lapan

Iowa State University - Department of Economics ( email )

260 Heady Hall
Ames, IA 50011
United States
515 294-5917 (Phone)

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