From global shocks to regional impacts: The pivotal role of trade intermediaries in Burkina Faso's economy

Abstract

This study investigates the impact of global price fluctuations on economic welfare in Burkina Faso, with a particular focus on the role of trade intermediaries. Using a computable general equilibrium (CGE) calibrated with a 2019 Social Accounting Matrix (SAM), the analysis incorporates a trade sector characterized by imperfect competition, modeled as a Cournot oligopoly with increasing returns to scale. The findings reveal that price shocks affect households asymmetrically, with price increases being transmitted more strongly than decreases, especially in markets with limited competition. In highly concentrated markets, intermediaries capture the benefits of declining global prices, preventing consumers from fully experiencing cost reductions. Conversely, in more competitive environments, the negative impact of price surges is alleviated, fostering more equitable economic outcomes. These findings highlight the need for policymakers to promote market competition and restructure distribution channels by reducing excessive intermediation, which inflates consumer prices. Strengthening competition within the trade sector can enhance economic resilience and ensure that trade liberalization initiatives, such as the African Continental Free Trade Area (AfCFTA), effectively contribute to regional welfare and inclusive economic growth.