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Examination of the effects of public spending and trade policy on real exchange rate in Cameroon

Author

Listed:
  • Victalice Ngimanang ACHAMOH

    (Faculty of Economics and Management, University of Dschang)

  • Francis Menjo BAYE

    (Faculty of Economics and Management, University of Yaoundé II)

Abstract

The study adopts the inter-temporal model of Rodríguez (1989) and Edward (1989) extended in Elbadawi and Soto (1997) to empirically examine the effect of public expenditure and trade openness on the real exchange rate using Cameroon data from 1977 to 2010. After exploring some issues on exchange rate and reviewing the relevant literature, the study employs residual based-cointegration technique. All the variables were stationary at level form or first differences. Public spending significantly appreciates the real exchange likewise the trade openness variable in the longrun. The results of the study suggests that appreciation of real exchange rate could be prevented by contracting public spending or adopting restrictive trade measures especially in the long run.

Suggested Citation

  • Victalice Ngimanang ACHAMOH & Francis Menjo BAYE, 2015. "Examination of the effects of public spending and trade policy on real exchange rate in Cameroon," EuroEconomica, Danubius University of Galati, issue 2(34), pages 115-128, November.
    • Handle: RePEc:dug:journl:y:2015:i:2:p:115-128
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    References listed on IDEAS

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