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Balance of Payments Constrained Growth Model: An Application to Cameroon
Yaya Sissoko

Last modified: 2011-09-08


The objective of this paper is to analyze the balance of payments constraint growth model in the context of the Cameroonian economy. This model asserts that in the long run, demand side variables play a major role in shaping economic growth through the balance of payments constraints. The evolution of a country’s exports over imports determines the long run growth pattern. In this case, the balance of payments deficit restricts the rate of growth of a country to levels consistent with a sustainable position in the external sector. In Cameroon, a reform program was initiated in 1986 to restore the economy on a path of growth which depended on development in the external sector. Several measures were implemented to improve the openness of the economy such as the devaluation of the CFA Franc. How did these measures influence the response of exports and imports and the impact of the trade balance on the rate of growth? The cointegration, vector error correction techniques is used to test the robustness of this model in the Cameroonian case. The Johansen cointegration analysis will be used to test the stability of the long-run relationship between export growth and economic growth in Cameroon and to explore the short-run adjustments in the sample period. Our results should be robust in various econometric techniques. Overall, our findings should support the Thirlwall’s law in Cameroon.