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Itoe and Atangana    

Full Length Research Paper

SAVINGS-INVESTMENT RELATIONSHIP IN CAMEROON: VECTOR AUTO REGRESSIVE ANALYSIS

Backe Itoe, PhD, *Ernest Musomo Atangana, MSc.

Department of Economics and Management, University of Buea, Cameroon

Corresponding Email Address: atanagaernest@yahoo.com

Received June 26, 2015; Accepted July 15, 2015

Abstract  

This study is design to investigate on the savings-investment relationship and subsequent effect on economic growth in Cameroon using time series data from 1980-2014 extracted from the World Bank data base, Africa Development Indicators and the Cameroon Finance Bill of the years 2009 and 2013. Vector Autoregressive (VAR) technique of estimation as necessitated by the study was established to estimate the causality between the variables specified in the models from which policy recommendations is drawn. Results of the study show that savings have a positively but insignificantly effects on investment in Cameroon. Thus we are able to recommend the harmonization and maintenance of competitive interest rates so that saving rate can improve, redesign policies to reduce excess liquidity which is a major feature in all Cameroonian banks, the government should mortgage private investment loans and create investment banks and encourage foreign direct investment by maintaining a competitive exchange rate all to booster savings and investment, consequently economic growth in Cameroon.

Keywords:Investment, Saving, Interest rate, Loans, Foreign Direct Investment.

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