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Impact of economic freedom on CEMAC countries

The study aimed to evaluate the impact of economic freedom on economic growth and investments in the Economic and Monetary Community of Central Africa (CEMAC). The region was created in 1994 by the six states of Cameroon, Chad, the Central African Republic, the Republic of Congo, Gabon and Equatorial Guinea. CEMAC countries comprise low and middle-income countries that share the same currency - the CFA Franc. The CEMAC countries were observed between 1995 and 2008 and panel regression methodologies were employed. A positive impact of economic freedom on economic growth was established using fixed effects method and the generalised method of moments. The impact of a unit increase in the economic freedom index on GDP per capita ranged between 72.65 and 124.51 units (dollars) increase on GDP per capita, ceteris paribus. Economic freedom was also found to Granger-cause economic growth. The results underline a significantly positive relationship between economic freedom and economic growth which is consistent with existing literature. The impact of economic freedom on domestic investment and foreign directs investment was then examined. With regard to domestic investment, economic freedom was found to be statistically significant and positive in all specifications of the model, thereby implying that a unit increase in the economic freedom index increases domestic investment by values of between 0.50 and 0.69 dollars in the CEMAC. The results obtained were consistent with most findings on the relationship between economic freedom and investments. With regard to the relationship between economic freedom and foreign direct investment inflows, economic freedom was unexpectedly statistically insignificant in most specifications of the model. The latter implies that economic freedom does not have a significant impact on foreign direct investment in the CEMAC. However, the study revealed that economic freedom Granger-causes foreign direct investment but foreign direct investment does not Granger-cause economic freedom. This means that economic freedom precedes foreign direct investments, and foreign direct investments do not precede economic freedom. The study strongly recommends an improvement of institutions in the CEMAC in order to enjoy greater levels of economic freedom and therefore foster economic growth and domestic investment in the region.

Identiferoai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:nmmu/vital:9020
Date January 2012
CreatorsOssono NII, Edith Gloria
PublisherNelson Mandela Metropolitan University, Faculty of Business and Economic Sciences
Source SetsSouth African National ETD Portal
LanguageEnglish
Detected LanguageEnglish
TypeThesis, Masters, MCom
Formatxvii, 135 leaves, pdf
RightsNelson Mandela Metropolitan University

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