Foreign aid and economic growth in Cameroon

Abstract

Cameroon is classified as a lower-middle-income country. Since it became a unified and independent country in 1961, Cameroon has received significant amounts of foreign aid, most of it from France and the European Economic Community. Since the 1960s, economic growth in the country has been quite significant. Between 1965 and 1980, the gross domestic product grew at an average annual rate of 5.1%, and at a rate of 2.3% between 1980 and 1990. Cameroon seems a good test case for determining the effects of foreign aid on economic growth in developing countries. An econometric model, based on the neoclassical production function, is developed and used to test the relationship between foreign aid and eonomic growth. The model is tested using time-series datd on the country from 1971 to 1990. The results show that domestic resources have a stronger impact on economic growth in Cameroon than foreign resources. These results, however, must be taken with the understanding that the data suffer from measurement problems, the time period is relatively short, and that estimated coefficients may suffer from specification and other problems.