Skip to main content

Advertisement

SpringerLink
Log in

Analysis of public investments and economic growth in Cameroon

  • Published:
Journal of Economics and Finance Aims and scope Submit manuscript

Abstract

This study investigates the contribution of public investment to economic growth in Cameroon from 1977 to 2015. It uses the Autoregressive Distributed Lag cointegration (ARDL) approach to estimate a modified version of the production function. The estimates indicate that real gross domestic product, labor force, public investment and private investment are cointegrated. Also based on the estimates, public and private investments have positive and significant effects on real gross domestic product in both the short-run and the long-run. The estimates further show that labor force has a significant long-run relationship with real gross domestic product but found no evidence of a significant short-run relationship. The error correction term is negative and significant suggesting that any deviations of real GDP growth from the long-term value would be corrected subsequently.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2
Fig. 3
Fig. 4

Similar content being viewed by others

Notes

  1. The overall quality of infrastructure is based on the yearly Global Competitive Report by the World Economic Forum surveys business leaders in their respective countries (IMF 2015). Thus, the quality of infrastructure is an index used in ranking countries based on the quality of ports, roads, air transport, electricity, and telecommunication infrastructure.

  2. The non-standard F-test was developed for small samples by Pesaran et al. (2001) and modified by Narayan (2004).

  3. The absence of reliable data on labor force participation in Cameroon is problematic especially as the rate of unemployment is quite high.

  4. The maximum lag of 9 was determined based on the suggestion by Ng and Perron (1995) which sets an upper bound P max for P. Following this approach, the absolute value of the t-statistic for testing the significance of the last lagged difference should be greater than 1.6 so that P is set to be equal to Pmax. If this not the case, the procedure consists of reducing lag length by one and of repeating the process.

References

  • Afonso A, St. Aubyn M (2008) Macroeconomic Rates of Public and Private Investment: Crowding-in and Crowding-out Effects. School of Economics and Management. Technical University of Lisbon. Working Paper No. 06/2008/DE/UECE

  • Albala-Bertrand JM, Mamatzakis EC (2001) Is public infrastructure productive? Evidence from Chile. Appl Econ Lett 8:195–198. https://doi.org/10.1080/13504850150504595

    Article  Google Scholar 

  • Amin A (1998) Cameroon’s Fiscal policy and economic growth AERC Research Paper No. 85. Nairobi

  • Amin A (2002) An examination of the sources of economic growth in Cameroon. AERC Research Paper No. 116. Nairobi

  • Aschauer D (1989) Is public expenditure productive? J Monet Econ 23:127–2000. https://doi.org/10.1016/0304-3932(89)90047-0

    Article  Google Scholar 

  • Ashipala J, Haimbodi N (2003) The impact of public investment on economic growth in Namibia. NEPRU Working Paper No. 88

  • Bahmani-Oskooee M, Wing NGRC (2002) Long-run demand for money in Hong Kong: an application of the ARDL model. Int J Bus Econ 1(2):147–155

    Google Scholar 

  • Bannerjee A, Dolado J, Mestre R (1998) Error-correction mechanism tests for cointegration in the single equation framework. J Time Ser Anal 19:267–283 http://www.tandfonline.com/doi/abs/10.1080/07350015.1992.10509905

    Article  Google Scholar 

  • Barro RJ (1990) Government spending in a simple model of endogenous growth. J Polit Econ 98:103–125 http://nrs.harvard.edu/urn-3:HUL.InstRepos:3451296

    Article  Google Scholar 

  • Calderon C, Serven L (2010) Infrastructure and economic development in sub-Saharan Africa. J Afr Econ 19:i13–i87. https://doi.org/10.1093/jae/ejp022

    Article  Google Scholar 

  • Canning D, Pedroni P (2008) Infrastructure, long-run economic growth and causality tests for Cointegrated panels. Manch Sch 76(5):504–527. https://doi.org/10.1111/j.1467-9957.2008.01073.x

    Article  Google Scholar 

  • Devarajan S, Swaroop V, Zou H (1996) The composition of public expenditure and economic growth. J Monet Econ 37:313–344. https://doi.org/10.1016/S0304-3932(96)90039-2

    Article  Google Scholar 

  • Dickey DA, Fuller WA (1981) Likelihood ratio statistics for autoregressive time series with a unit root. Econometric Soc 49(4):1057–1072. https://doi.org/10.2307/1912517

    Article  Google Scholar 

  • Dominguez-Torres C, Foster V (2011) Cameroon’s Infrastructure : a continental perspective. Policy Research working paper; no. WPS 5697. World Bank. © World Bank. https://openknowledge.worldbank.org/handle/10986/3461 License : Creative Commons Attribution CC BY 3.0

  • Eagle RF, Granger CWJ (1987) Cointegration and error correction: representation, estimation and testing. Econometrica 55(2):251–276. https://doi.org/10.2307/1913236

    Article  Google Scholar 

  • Erenburg SJ (1993) The real effects of public investment on private investment. Appl Econ 25:831–837. https://doi.org/10.1080/00036849300000137

    Article  Google Scholar 

  • Fullerton TM, Monzon AG, Walke AG (2013) Physical infrastructure and economic growth in El Paso. Econ Dev Q 27(4):363–373. https://doi.org/10.1177/0891242413489168

    Article  Google Scholar 

  • Gauthier B, Zeufack A (2011) Governance and oil revenues in Cameroon. In: Collier P, Venables AJ (eds) Plundered nations? Successes and failures in natural resource extraction. Palgrave Macmillan, New York, pp 27–78

    Google Scholar 

  • Ghura D (1997) Private investment and endogenous growth: evidence from Cameroon. IMF Working Papers, 97(165)

  • Gupta S, Kanpur A, Papageorgiou C, Wane A (2011) Efficiency-adjusted public capital and growth. IMF Working Paper No. 217. International Monetary Fund, Washington D.C

  • International Monetary Fund. (2014). Cameroon: selected issues, IMF Country Report No. 213. Washington, D.C.

  • International Monetary Fund. (2015). Cameroon: selected issues, IMF country report no. 15/332. Washington, D.C.

  • Johansen S, Juselius K (1990) Maximum likelihood estimation and inference on Cointegration with applications to the demand for money. Oxf Bull Econ Stat 52:169–210. https://doi.org/10.1111/j.1468-0084.1990.mp52002003.x

    Article  Google Scholar 

  • Keefer PF, Knack S (2007) Boondoggles, rent-seeking and political checks and balances: public investment under unaccountable governments. Rev Econ Stat 89:566–572

    Article  Google Scholar 

  • Khan MS, Reinhart CM (1990) Private investment and economic growth in developing countries. World Dev 18(1):19–27. https://doi.org/10.1016/0305-750X(90)90100-C

    Article  Google Scholar 

  • Narayan PK, (2004) Reformulating critical values for the bounds f-statistics approach to cointegration: an application to the tourism demand model for Fiji. Monash University, Clayton, Victoria

  • Nazmi N, Ramirez MD (1997) Public and private investment and economic growth in Mexico. Contemp Econ Policy 15(1):65–75. https://doi.org/10.1111/j.1465-7287.1997.tb00455.x

    Article  Google Scholar 

  • Ng S, Perron P (1995) Unit Root Tests in ARMA Models with Data-Dependent Methods for the Selection of the Truncation Lag. J Am Stat Assoc 90(429):268–281

  • Pesaran MH, Pesaran B (1997) Working with Microfit 4.0: Interactive econometric analysis;[Windows version]. Oxford University press

  • Pesaran MH, Shin Y (1999) An autoregressive distributed lag-Modelling approaches to Cointegration analysis. Econometrics and economic theory in the 20th century: the Ragnar Frisch centennial symposium. Strom S.-Cambridge University Press, Cambridge

    Google Scholar 

  • Pesaran MH, Shin Y, Smith R (2001) Bounds testing approaches to the analysis of level relationship. J Appl Econ 16(3):289–326. https://doi.org/10.1002/jae.616

    Article  Google Scholar 

  • Ramireez MD (2009). Does public investment enhance labor productivity growth in Argentina? A Cointegration analysis. Economics Department Working Paper No. 57, Yale University

  • Samaké I, Muthoora P S, Versailles B (2013) Fiscal sustainability, public investment, and growth in natural resource-rich, low-income countries: the case of Cameroon. IMF Working Papers, 13(144)

  • Subramanian S (1994) The oil boom and after: structural adjustment in Cameroon. Cornell Food and Nutrition Policy Program, Ithaca

    Google Scholar 

  • Tabova A, Baker C (2011) Determinants of non-oil growth in the FRA-zone oil producing countries: how do they differ? IMF Working Paper-African Department, Washington DC

  • Tchouassi G, Ngangue N (2014) Private and public Investment in Africa: a time-series cross-country analysis. Int J Econ Financ 6(5):264–273. https://doi.org/10.5539/ijef.v6n5p264

    Article  Google Scholar 

  • Warner A (2014) Public investment as an engine of growth. IMF Working Papers, 14(148)

  • World Bank (2016) World Development Indicators 2016. Washington, DC. © World Bank. https://openknowledge.worldbank.org/handle/10986/23969 License: CC BY 3.0 IGO.

  • Zivot E, Andrews WK (2002) Further evidence on the great crash, the oil-price shock, and the unit-root hypothesis. J Bus Econ Stat 20(1):25–44. https://doi.org/10.1198/073500102753410372

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. Bowie State University, 811 Falls Lake Drive, Bowie, MD, 20721, USA

    Augustin Ntembe

  2. Institute for Development Solutions, Inc & Clayton State University, Georgia, 4067 Round Stone Trail, Snellville, GA, 30039, USA

    Aloysius Ajab Amin

  3. Bowie State University, 14000 Jericho Park Road, Bowie, MD, 20715, USA

    Regina Tawah

Authors
  1. Augustin Ntembe
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Aloysius Ajab Amin
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Regina Tawah
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Augustin Ntembe.

Appendices

Appendix 1

Table 7 Cameroon: real GDP, labor force, public investment, private investment (millions of dollars, and labor in thousands), 1977–2015
Full size table

Appendix 2

Table 8 Lag length selection criteria of the VAR system, sample: 1977–2015
Full size table

Appendix 3

Table 9 The estimated autoregressive distributed lag model
Full size table

Appendix 4

Fig. 5
figure 5

Model selection criteria

Full size image

Appendix 5

Fig. 6
figure 6

Dynamic stability of the ARDL (3,4,4,5) model

Full size image

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Ntembe, A., Amin, A.A. & Tawah, R. Analysis of public investments and economic growth in Cameroon. J Econ Finan 42, 591–614 (2018). https://doi.org/10.1007/s12197-017-9411-0

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s12197-017-9411-0

Keywords

JEL Classification

Search

Navigation