FINANCIAL DEVELOPMENT AND ECONOMIC GROWTH IN CAMEROON: AN ARDL BOUND TEST AND MULTIVARIATE GRANGER CAUSALITY FRAMEWORK

Abstract

Although the financial system development is vital for a country’s economic growth, it is still underdeveloped in most developing countries due to poor financial policies in terms of formulation and implementation. Therefore, this study aims to examine the effects of financial system development on the economic growth of Cameroon from 1980-2020. The study makes use of the ARDL bound test and multivariate Granger causality test. The results indicate that the financial development index and liquid liabilities have short and long run positive and significant effects on economic growth. Also, the result further reveals that in the short run, there is bidirectional causality between liquid liabilities and economic growth and a unidirectional causality running from financial development index to economic growth while in the long run, causal relationship runs from financial development to economic growth. The study recommends that the government should improve its financial system by constantly monitoring the sector to create an efficient, competitive, and stable financial sector that can contribute significantly to boosting economic growth.