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Analysis of the relationship between oil rent and crude oil production in Cameroon: Evidence from ARDL and NARDL models

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  • Ewodo-Amougou, Marcel Rodrigue
  • Sapnken, Flavian Emmanuel
  • Mfetoum, Inoussah Moungnutou
  • Tamba, Jean Gaston

Abstract

This study examines the symmetric and asymmetric impact of crude oil production on oil rent in Cameroon by taking into account the price of crude, human development index (HDI) and corruption over the period 1977–2019; as well as the causal links between the variables. This study uses Augmented Dickey-Fuller and Zivot-Andrews tests to check the stationarity of the variables. Subsequently, ARDL model is estimated and robustness tests are performed to attest the model's validity. The bound test is applied to confirm the existence of long-term relationships. NARDL model follows the same steps and ends with the Wald test to confirm asymmetric effects of variables. Finally, the Toda-Yamamoto causality test is applied to establish the different influences between the variables under study. The main results of this research confirm the existence of oil resource curse in Cameroon, triggered in the long run by the negative and significant linear impact of crude production on oil rent and by the negative and significant effect of positive shocks to crude production on oil rent in the long run. Furthermore, there is a two-way causality between oil rent and crude production. The current study offers a policy orientation according to which a good mastery of crude prices and an optimal social policy, a real barrier against corruption and a stimulator of the quality of productivity, would be essential to perpetuate the exploitation of crude in order to continue to reap more profits. This would ultimately boost the economic structure of Cameroon. The oil rent should really be directed towards the economic circuit of Cameroon and reserve a large part for oil exploration which would allow the discovery of new deposits with a view to perpetuating the exploitation of crude. Cameroon should produce its own crude, transform it and consume it, in order to considerably reduce the effects of the oil curse. This study adds to the literature on the relationship between oil rent and crude production by showing how crude production affects oil rent in Cameroon. This study is the first to highlight the HDI and corruption as additional explanatory variables for oil rent.

Suggested Citation

  • Ewodo-Amougou, Marcel Rodrigue & Sapnken, Flavian Emmanuel & Mfetoum, Inoussah Moungnutou & Tamba, Jean Gaston, 2023. "Analysis of the relationship between oil rent and crude oil production in Cameroon: Evidence from ARDL and NARDL models," Resources Policy, Elsevier, vol. 85(PB).
    • Handle: RePEc:eee:jrpoli:v:85:y:2023:i:pb:s0301420723006025
    DOI: 10.1016/j.resourpol.2023.103891
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