Import Tariff Pass-Through Effect and the Spatial Distribution of Domestic Consumer Goods Prices: Zimbabwe (2009 to 2019)

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ABSTRACTThe study of import tariffs pass-through has been observed to be crucial for policymaking. The extant literature on import tariff pass-through effects has ignored the possibility of spatial dependence between domestic goods prices. This study proposes an extension of the traditional empirical model by controlling for the domestic spatial dependence of prices at the district level. The estimates rely on a district-level panel dataset of consumer goods for Zimbabwe. The spatial econometrics models used show positive spatial dependence of domestic goods prices. When compared to our modified model, the traditional import tariffs pass-through model was found to highly overestimate the import tariff pass-through effect.