International Journal of Economics, Finance and Management Sciences
Volume 6, Issue 5, October 2018, Pages: 200-207
Received: Sep. 20, 2018;
Accepted: Oct. 16, 2018;
Published: Oct. 29, 2018
Views 937 Downloads 120
Tékam Oumbé Honoré, Department of Economics, Faculty of Economics and Management, University of Dschang, Dschang, Cameroon
One of the most important goals for all countries is to maintain sustainable growth with low inflation. As a result, each government is fighting high inflation. To stabilize the rate of inflation, it is interesting to study its different sources and monetary policy has one. This study has two objectives: the first objective is to analyze the effect of monetary policy on inflation and the second objective is to examine the nature of the relationship between money supply and inflation in Cameroon. This study uses annual time series data from 1980 to 2016. Johansen's cointegration test was used to find the relationship between the money supply and inflation. The ARDL estimation method was used to analyze the effect of the money supply on inflation in Cameroon and the Toda and Yamamoto's causality test was used to test the causality between money supply and inflation. The results show that, there is a long-run equilibrium relationship between the money supply and inflation; the money supply has a positive and significant effect on inflation in Cameroon and there is one-way causality from money supply to inflation. This study shows that inflation has a monetary source in Cameroon. Thus, monetary policy should be planned to maintain price stability by controlling the growth of the money supply in the Cameroonian economy.
Tékam Oumbé Honoré,
Monetary Policy and Inflation: Empirical Evidence from Cameroon, International Journal of Economics, Finance and Management Sciences.
Vol. 6, No. 5,
2018, pp. 200-207.
Chaudhry, I. S., Farooq, R. I. F., & Murtaza, G. (2015). Monetary policy and its inflationary pressure in Pakistan. Pakistan Economic and Social Review, 53(2), p.251-268.
Haldane, A G (1997), Designing Inflation Targets in P Lowe (ed.), Monetary Policy and Inflation Targeting. Reserve Bank of Australia, 60(1), P.22-26.
Tang, C. F. and Lean, H. H. (2007). Is the Phillips curve stable for Malaysia? New empirical evidence. Malaysian Journal of Economic Studies, 44(2), p. 95-105.
Brumm, H. J. (2005). Money growth, output growth, and inflation: A reexamination of the modern quantity theory’s Linchpin Prediction. Southern Economic Journal, 71(3), p. 661-667.
Friedman, M. (1963). Inflation: Causes and Consequences. Asia Publishing House, New York.
Grauwe, P. And Magdalena, P. (2005). Is Inflation Always and Everywhere a Monetary Phenomenon?. The Scandinavian Journal of Economics, 107(2), p. 239-259.
Qayyum, A. (2006). Money, inflation, and growth in Pakistan. The Pakistan Development Review, 45(2), p. 203-212.
Ratnasiri, H. (2009). The Main Determinants of Inflation in Sri Lanka: A VAR Based Analysis. Central Bank of Sri Lanka-Staff Studies, 39 (1&2) p. 1-14.
Tabi, N., and Ondoa, A. (2011). Inflation, Money and Economic Growth in Cameroon. International Journal of Financial Research, 2, p. 45 -56.
Dania, N. (2013). Determinants of Inflation in Nigeria (1970 – 2010). The Business & Management Review, 3(2), p. 106-114.
Hossain, T., and Islam, N. (2013) Economic Analysis of the Determinants of Inflation in Bangladesh. The International Journal of Social Sciences, 11(1), p. 29-36.
Iya, I. B., and Aminu, U. (2014). An Empirical Analysis if Determinants of Inflation in Nigeria. Journal of Economics and Sustainable Development, 5(1), p. 140-150.
Mohamed, I. (2016): The Impacts of Monetary Policies on Inflation Rates in Sudan (1970–2014). International Journal of Advance Research in Management, Engineering and Technology 1(1), P. 75-81.
Darrat, F. (1986). Money, inflation and causality in North Africa countries: An empirical investigation. Journal of macroeconomics, 8(1), p. 87- 103.
Jones, J., and Khilji, N. (1988). Money Growth, Inflation, and Causality: Empirical Evidence for Pakistan 1973-85. The Pakistan Development Review, 28(1), p. 45-58.
Tang, T-C. (2004). Causality between Money and Price in Malaysia: A Revisit. Labuan Bulletin of International Business & Finance, 2 (1), p.71-81.
Us, V. (2004). Inflation dynamics and monetary policy strategy: Some aspects for the Turkish economy. Journal of Policy Modeling, 26, p.1003–1013.
Hossain, A. (2005): The Granger-causality between money growth, inflation, currency devaluation and economic growth in Indonesia: 1954-2002. International Journal of Applied Econometrics and Quantitative Studies, 2(3), p.69-92.
Salma, A. (2016). “Temporal causality between inflation and money supply: a case study of Bangladesh”. International Research Journal of Management &Social Sciences, 1(5), p. 2455-4553.
Fitsum, S., Yilkal, W., and Teshome, A. (2016). The Relationship between Inflation, Money Supply and Economic Growth in Ethiopia: Co integration and Causality Analysis. International Journal of Scientific and Research Publications, 6(1), P. 2250-3153.
Brida, J. G., Sanchez Carrera, E. J., and Risso, W. A. (2008). Tourism’s impact on long-run Mexican Economic Growth. Economics Bulletin, 3(21), p.1-8.
Zortuk, M. (2009). Economic impact of tourism on Turkey’s economy: evidence from cointégration tests. International Research Journal of Finance and Economics, 25, p. 231-239.
Toda, H. Y. and Yamamoto, T. (1995). Statistical Inference in Vector Autoregression with Possibly Integrated Processes. Journal of Econometrics, 66 (1/2), p. 225-250.
Dickey, D. A. and Fuller, W. A. (1981). Likelihood Ratio Statistics for Autoregressive Time Series with a Unit Root., Econometrica, 49, p. 1057-1072.
Phillips, P. C. B. and P. Perron, (1988). Testing for a unit root in time series regression. Biometrika, vol.75 (2), p. 335-346.  Johansen, S. (1988). Statistical Analysis of Cointegration Vectors. Journal of Economic Dynamics and Control, 12(2–3), p. 231–254.
Diop, A., Dufrénot, G., & Sanon, G. (2008). Long Run Determinants of Inflation in WAEMU. In A-M. Gulde and C. Tsangarides (Eds.), the CFA Franc Zone Common Currency, Uncommon Challenges. Washington DC, International Monetary Fund.