Import Tariff Reduction and Fiscal Sustainability: A Macro-Econometric Modelling for Ethiopia

The main objective of this study is to examine the dynamic impact import tariff reduction on major macroeconomic variables and its long-run implications for fiscal sustainability Ethiopia. In addition, it estimates increase in average consumption tax required compensate possible revenue loss sustainability. A Recursive Dynamic Computable General Equilibrium Model (RDCGEM) used assess increased required. novel as there are no studies general, Ethiopia particular regard. We use available 2013/2014 base year data from national income accounts, balance payments accounts RDCGEM calibrated data, checked correctness, tested robustness using sensitivity analysis. model then simulated under case various scenarios based which impacts analyzed. Based RDCGM outputs, verified, a cointegration method, we policy. results suggest 95 percent that negatively variables. It also leads long-term unsustainability. joint reform country has relatively better but slightly negative effects household consumption.