The Determinants of Foreign Direct Investment Inflows in Cameroon
Most economies usually strive for the attractiveness of inward Foreign Direct Investment (FDI) due to the advantages that it possesses as an instrument for economic expansion. Africa in general and Cameroon in specific join the rest of the world in quest for FDI inflows. This study examines the determinants of FDI inflows in the Cameroon. Analysis were carried out over the years between 1980 and 2012 with data obtained from National Account Statistics (NAS), Bank of Central African States (BEAC), United Nations Conference on Trade and Development (UNCTAD) and World Bank Investment Report (WBIR). The co-integration test was conducted to find out if the determinants are co-integrated in the same order and the Augmented Dickey Fuller (ADF) test was carried out to examine if these variables are stationary. The result showed that all the determinants were stationary and therefore fulfils the condition to be tested for vector auto regression (VAR). Vector auto regression was conducted to capture the linear independence among the multiple time series of FDI inflows and its determinants. The following determinants of inward FDI were tested: trade openness, rate of inflation, exchange rate, GDP per capita, natural resource, infrastructure and liberalisation. The VAR result illustrated that only trade openness and exchange rate were statistically significant and thus, concluding that trade openness and exchange rate contribute to inward FDI in Cameroon while the other variables have just limited or no role to play as a determinants of FDI inflows in Cameroon. It was therefore recommended that FDI inflows should be encouraged in Cameroon since it exhibits many advantages that could positively stimulate the economy, leading to increase in economic growth.