Foreign aid and economic growth in Cameroon: evidence from cointegration tests

Abstract

Mbaku (1993, 1994) presents empirical evidence to support the hypothesis that in Cameroon, during 1971–90, foreign aid had no impact on economic growth. In this note, we apply the recent technique of unit-root testing and Johansen's maximum likelihood procedure to show, on the contrary, that foreign aid had a positive contribution to economic growth in Cameroon during the period under study. We attribute the differences in the results to the differences in methodology, and the implied optimal lag structure in our study. We contend that cointegration tests are warranted in studies of this nature, before any structural analysis and policy implications of the model, are derived.