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Importance of official development assistance in improving the economic cycles of Economic and Monetary Community of Central Africa countries

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  • Hervé Nenghem Takam

    (University of Dschang)

  • Roger Tsafack Nanfosso

    (University of Dschang)

Abstract

Despite the abundant literature on official development assistance and its effect on recipients, surprisingly little is known about its effect on economic cycles. The aim of this study is to analyze the effect of official development assistance on the economic cycles of Economic and Monetary Community of Central Africa countries (CEMAC). The methodology used to achieve this objective is the AutoRegressive Distributed Lag (ARDL) method. The study period runs from 1985 to 2019. Our results reveal that, in the short term, official development assistance, in addition to being negative, has no significant impact on the economic cycles of CEMAC countries. On the other hand, official development assistance, in addition to having a positive and statistically significant long-term influence on economic cycles, is procyclical. The significance of Official Development Assistance (ODA) on the output gap is not negligible. Furthermore, using Toda and Yamamoto’s (J Econ 66(1–2):225–250, 1995) causality test, we were able to observe a unidirectional relationship between ODA and business cycles. This causal relationship runs from ODA to cycles. So, in order to control CEMAC countries’ economic cycles and external economic transition, governments should strive to set up appropriate policies. Indeed, it makes sense to set up an appropriate tax system to control donor aid.

Suggested Citation

  • Hervé Nenghem Takam & Roger Tsafack Nanfosso, 2024. "Importance of official development assistance in improving the economic cycles of Economic and Monetary Community of Central Africa countries," SN Business & Economics, Springer, vol. 4(7), pages 1-22, July.
    • Handle: RePEc:spr:snbeco:v:4:y:2024:i:7:d:10.1007_s43546-024-00677-8
    DOI: 10.1007/s43546-024-00677-8
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