Saving, Investment and Economic Growth in Cameroun: A Multivariate Approach

Abstract

The nature of the link between savings investment and growth in empirical and theoretical research in Cameroon is not well known in Cameroon. The objective of this study is to examine the nature of the relationship between savings, investment and economic growth in Cameroon from 1980 to 2010. In order to achieve our objective, data from World Bank were collected and tested in a Vector Auto Regressive Model. The Toda-Yamamoto (1995) Granger non causality test used in testing the hypothesis which was to investigate the nature of the link between investment, saving and growth showed the following results: In Cameroon, there is a unidirectional causal relationship from investment to savings, from growth to savings, and finally from growth to investment. Meanwhile, there is no causal link from savings to investment, savings towards growth and investment to growth in Cameroon. Thus, the recommendation among other things is that, Cameroon government should create an incentive framework conducive to the enhancement of gross national savings and investment to strengthen production and economic growth.

Revisiting Keynes’ Investment and Saving Model in Indonesia

“…While several studies do not find the causal relationship between investment and saving, other studies demonstrate that investment affects saving. For example, Ngouhouo and Mouchili (2014) revealed the causal relationship between investment and saving in Cameroon because of the Structural Adjustment Program. This program provided the IMF and the World Bank aid to countries experiencing an economic crisis.…”

“…Prior studies by Yamori (1995), Tsoukis and Alyousha (2001), Tehranchian and Behravesh (2011), Jangili (2011), Mensah (2012), Jošić and Jošić (2012), Kumar, Webber, and Fargher (2012), Hundie (2014), Rahman and Hossain (2015), Al-Afeef and Al-Qudah (2015), Itoe and Atangana (2015), Abusomwan and Ezebuihe (2017), Aka (2017), Yadav, Goyari and Mishra (2018), Alrasheedy and Alaidarous (2018) empirically confirm the IS model by arguing that investment increases because of increased saving. However, several studies fail to uphold the IS model to argue that these two variables' positive correlation indicates that investment increases saving, not vice versa (Onafowara, Owoye, & Huart, 2011;Ngouhouo & Mouchili, 2014).…”

An Interest Rate Commission Agent Banking System

“…Traditional banks hold customers' funds as their own assets; even though holding customers' funds as own asset on the balance sheet exposed banks to credit, liquidity and interest rate risks. The current deposit mobilisation strategies through deposit product promotion that focused on spot lottery in terms of interest rates made deposit mobilisation seasonal (Venkatesan, 2012;Ngouhouo & Mouchili, 2014). However, an interest rate commission agent banking system has mutual benefits for investors, entrepreneurs and the agent bank.…”

“…The mobilisation of deposit through interest rate incentive enables the bank to have more stable funds which could be used for loans. Paying deposit interest rate into a depositor's account enhances deposit mobilisation which in turn increases investment and economic growth (Ngouhouo & Mouchili, 2014). As deposit interest rate increases, the bank stable deposit mobilisation increases.…”

“…Incentive in kind becomes the primary function for banks' deposit mobilisation. Ngouhouo and Mouchili (2014) recommended that the government should create an incentive framework conducive to the enhancement of gross national savings and investment to strengthen production and economic growth. However, incentive in kind did not benefit all depositors and led to seasonal deposit mobilisation.…”