Selected macroeconomic determinants and economic growth in Cameroon (1970–2018) “dead or alive” an ARDL approach

Abstract

Purpose – The purpose of this paper is to examine key macroeconomic determinants on Cameroon's economic growth from 1970 to 2018. Design/methodology/approach – Data were obtained from the World Development Indicators and applied on time series data econometric techniques. The auto-regressive distributed lag (ARDL) bounds model analyzed the data since the variables had different order of integration. Findings – The results showed long and short runs’ positive and significant connection between economic growth in Cameroon and government expenditure; trade openness, gross capital formation and exchange rate. Human capital development, foreign aid, money supply, inflation and foreign direct investment negatively and significantly affected economic growth in the short and long-runs. Hence, the macroeconomic indicators are not death. Research limitations/implications – The present research paper has tried to capture the impact of nine macroeconomic determinants on economic growth such as the government expenditure (LNGOVEXP), human capital development (LNHCD), foreign aids (AID), trade openness (LNTOP), foreign direct investment (LNFDI), gross capital formation (INVEST), broad money (LNM2), official exchange rate (LNEXHRATE) and Inflation (LNINFLA). However, these variables have the tendency to affect each other in a unidirectional or bidirectional manner. Further, the present research paper is unable to capture the impact of other macroeconomic variable due to the unavailability of data. Practical implications – The study recommends that Cameroon should use proper planning and strategic policy interventions to achieve higher sustainable economic growth with human capital development, foreign aid, money supply, foreign direct investment and moderate inflation. Social implications – Macroeconomic indicators, if managed well, increase economic growth. Originality/value – This paper to the best of the researcher's knowledge presents new background information to both policymakers and researchers on the main macroeconomic determinants using econometric analysis.

Keywords

• Economic growth
• Government expenditure
• Trade openness
• Gross capital investment
• Exchange rate