DR Sundjo and Wanda

IOSR Journal of Economics and Finance (IOSR-JEF)
e-ISSN: 2321-5933, p-ISSN: 2321-5925. Volume 12, Issue 3 Ser. II (May –June 2021), PP 54-66
www.iosrjournals.org
The Effects of Remittances on the Economic Growth of

Cameroon
Ngouneou Wanda Kevin1 and Sundjo Fabien 2
1
Pan-African University Institute of Governance, Humanities and Social Sciences
2
Lecturer of Economics, University of Bamenda-HTTC, Department of Economics -Cameroon
Abstract
This work set out to investigate the effect of remittances on the Economic Growth (GDP) of Cameroon.
Specifically, its (a) investigate the relationship between remittances and the GDP of Cameroon,(b) scrutinise
the effect of remittances paid on the GDP of Cameroon and (c) examine the effect of remittances received on the
GDP of Cameroon. In order to do this, we obtained data from the World Bank Development Indicators for a
period of 37 years that is from 1980-2017. In order to analyse the data, use was made of STATA-14 and we
employed correlation and the multiple regression techniques. To ascertain the results, Pre-test was carried out
to test for stationary, multicolinearity and heteroscadasticity. The correlation results show that, there exist a
positive (0.495) and statistically significant relationship between remittances and GDP. The multiple regression
results show that Remittances paid positively and significantly affect GDP. The correlation as well as the
regression results further show that remittances received also have a positive but statistically insignificant effect
on the GDP of Cameroon between the periods of 1980- 2017. We thus recommend that the Cameroonian
government should create a favourable atmosphere for migrant workers to remit more funds and also to
transfer the acquired knowledge and technologies back home. Banks and money transfer agencies should
moderate their tedious conditions required to receive and send money.
Keywords: GDP, Remittances Paid, Remittances Received and Effects
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Date of Submission: 21-05-2021 Date of Acceptance: 06-06-2021
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I. Introduction
Low and unsteady economic growth rates and strategies for fostering growth are major issues of
concern for Cameroon. Remittances naturally come from migration as basic gains and compensations to the
emigrant countries for losing part of their labour force (Blouchoutzi & Nikas, 2014). Remittance is a new
phenomenon in the global financial system because of its size and impact on the world economic systems.
Remittances from overseas play a salient role in the development of many African countries including
Cameroon. Migrants’ remittances have currently been ranked as the second largest source of external inflows to
developing countries behind the Foreign Direct Investment (FDI) (World Bank, 2014). This increase in
remittances to developing countries can be recognised due to the increase in the number of people going abroad;
and faster, easier and cheaper modes of transferring money around the world today (Imai, Gaiha, & Ali, 2012)
and (World Bank, 2014).
For many developing countries, remittances constitute a large source of foreign income relative to other
financial flows. Remittances have shifted seriously to reducing poverty and promoting human development.
Evidently this is well documented and often well reported to anchor and influence the overall development
process (Ratha, 2007) and (Das & Serieux, 2010). One of the most noticeable effects of globalisation in the
world today is the great increase in migration among countries. The interconnectedness of the world makes it
possible for people to move in considerable numbers across national boundaries in search for greener
opportunities on foreign soils. Geographic barriers have been reduced; distances are shortened thanks to recent
means of communication which have contributed to the facilitation of migration.
There is a growing debate on how migrants’ remittances are used and to what extent they contribute to
the migrants’ country of origin (Ratha, 2003). Developed countries serve as the origin of total remittances, with
the United States of America playing the leading role. It is believed that remittances from south-south are
important and even from north-south flows but one thing is certain about this which is the scarcity of data (Ofeh
& Muandzevara, 2017). Since the 1980s, remittances to countries in Latin America, the Caribbean, and the East
Asia and Pacific regions have grown more rapidly than the average for developing countries generally. In 2005,
the top three recipients; China, India and Mexico accounted for more than one-third of the remittances to
developing countries. Among the top 25 recipients of remittances, only one Nigeria is in Sub-Saharan Africa
DOI: 10.9790/5933-1203025466 www.iosrjournals.org 54 | Page

The Effects of Remittances on the Economic Growth Of Cameroon
(SSA) but three of the eight countries in South Asia; Bangladesh, India, and Pakistan appear on the list (Gupta,
Patttillo, & Wagh, 2007).
In addition, there are flows of remittances that cannot be measured because they are sent through
informal channels such as ‘Hawala’ and ‘Hundi’ in South Asia (Pakistan) and ‘Pasala’ in the Philippines (Yang,
2011). So, it is therefore difficult to evaluate the real value of migrant remittances on economic growth since
most remittances are sent informally (Ofeh & Muandzevara, 2017). Most often, people use unofficial channels
like Hundi and Hawala to reduce the sending cost of remittances which are called informal remittances.
Informal channels include money earned abroad brought back by family, friends or the migrant themselves
(Larsson & Ångman, 2014) or through a network of relationship like friendship, kinship and regional attachment
(Rahman & Yeoh, 2008). Government supervision and laws are associated with formal channels such as banks,
postal services, Money Transfer Operators (MTO) and other wire transfer services. In most cases, these
channels are related to high transaction costs and exchange loss (Sutradhar, 2020). However, because of recent
attempts to fight money-laundry these informal channels could be decreasing and are expected to be higher in
countries with less developed financial markets (Giuliani & Ruiz Arranz, 2009).
In studying the impact of remittances at the aggregate level, most analysts have concentrated on Latin
America or South Asia, where the volumes swamp those going to SSA. But at the base, remittances are private
intra-family or intracommunity income transfers that directly addresses the most relevant challenge for SSA;
poverty. Further Studies from the World Bank (2020) show that remittances alleviate poverty in lower- and
middle-income countries, improve nutritional outcomes, are associated with higher spending on education, and
reduce child labour in disadvantaged households. A fall in remittances affect families’ ability to spend on these
areas as more of their finances will be directed to solve food shortages and immediate livelihoods needs. The
concrete reason for most households in Cameroon to have someone abroad so that they can lean on for
remittance help is finance (Baye, 2005). It is difficult to evaluate the real value of migrant remittances on
Cameroon economic growth since most remittances are sent informally. At the same time, migration
necessitates brain-drain that hinders economic growth. Also the real impact of migrant remittances on
Cameroon’s economy could be minimised by volatile exchange rates and domestic inflation.
As concerns the problem statement, remittances play an important role in developing countries, as a
source of household income and are considered as a stable source (Alfieri, Havinga, & Hvidsten, 2005). Many
families rely on remittances sent to them by their family members abroad to live or “survive” on monthly basis
or annually. Remittances have become very important in the society. Given its importance, many people seem to
see it just as a simple transfer of money from one family member living abroad to his family members back
home to satisfy their daily needs, they forget to notice that it implies capital inflow, economic development and
also rise in foreign device. Studies done in Cameroon and SSA in general have concluded that, remittances have
a positive impact on the economic development of the country. Even though studies have proven that
remittances have a positive impact on the economic growth of Cameroon, the reality seems to be contradictory
because remittances impact is not physically felt on the country’s growth. Instead, the country’s development is
seen to be slow and somehow reluctant, making us to doubt on the impact of remittances on the economic
growth of the country. Despite the fact that there is a considerable amount of remittances inflow in the country,
economic growth is still lagging behind. Pushing many people to think that the Cameroonian diaspora has no
impact on the economic development of the county. This notwithstanding, remittances come across with a lot of
short-comings too which hinders human development, human capital, labour supply and inequitable distribution
of goods and services in the receiving countries. Our problem therefore is to assess the effects of remittances on
economic growth in Cameroon during the time frame of 1980-2017, while paying attention on its significance.
In light with the above background, we have as main objective; to examine the effects of remittances
on economic growth in Cameroon.
Our specific research objectives are:
 to identify the relationship between remittances and the GDP of Cameroon,
 to assess the effects of remittances paid on the GDP of Cameroon
 to assess the effects of remittances received on the GDP of Cameroon.
Most of the existing literature only provides the joint impact of remittances for developing or emerging
countries (Sutradhar, 2020) and others focused more on the impact of remittances on Sub-Sahara Africa, without
a critical view on Cameroon as a unique country. The originality of this research lies in endeavour to segregate
remittance received and remittance paid in the context of Cameroon.
The rest of the paper is made up of 5 sections structured in the following way: section 2 will focus on
literature review, section 3 will duel on the methodology, section 4 will present the findings and section 5 will
conclude the paper and give recommendations.

II. Literature Review

Long before colonisation, people were already moving for several reasons: migration is a phenomenon
as old as man. Written and oral sources of the history of Cameroon show that migration is an old practice among
its people. Presently, the increased flow of Cameroonian migration is due to a general movement from the
countryside to the cities; in search of jobs, education and to run away from the internal crisis devastating the
Anglophone sides of the country and a tendency towards international migration, particularly to African and
European countries (Zourkaleini, et al., 2013).
In the mid‐ 1980s, Sub‐ Saharan Africa entered in an unexpected long period of economic instability.
This disadvantaged vulnerable population and reduced their ability to properly care for younger generations. In
this situation of economic slowdown, African authorities started looking for new development strategies. This
justified the application of the first Structural Adjustment Programmes (SAPs), followed by new industrial and
agricultural policies, and the devaluation of the CFA franc in 1994. The first adjustment focused on jobs
followed by salaries, both of which are elements that increase the desire to leave a country. The economic crisis
became a particularly fertile context for the emergence of many survival strategies, including international
migration (Zourkaleini, et al., 2013).
Nowadays, migration is seen by many young people as a strategy to fight against unemployment and as
a continuous search for better living conditions. As Tabi (2009) pointed out: “Before the outbreak of the
economic crisis in the 1980s, a tendency towards sedentarisation of Cameroonian workers was observed; a
complete policy framework for the Cameroonisation of senior staff was also implemented. Migration during this
period was principally related to study purposes, hence its selective character” (Tabi, 2009). The emigration of
Cameroonian skilled workers was partly limited by the requirement for those who studied abroad on
government scholarships to return and work in the country for at least 10 years before leaving public
administration. Since then, emigration has been enormously rising.
Migration in Cameroon can be described through several factors that discourage potential immigrants
and reduce migration flows into Cameroon, and cause the leaving of many Cameroonians out of the country but
also within the country. Indeed, like most developing countries, Cameroon has been experiencing development
difficulties since the 1980s due to poverty, economic crisis, climate change disasters, conflicts, soaring
population growth, external debt burden, the poorly controlled urbanisation of cities and adjustment policies that
are often not suited to the national situation.
Most displacements associated with conflicts in Cameroon historically occurred in the Far North, the
poorest region in the country. The Boko Haram insurgency, which originated in Nigeria, and military operations
against it have fuelled insecurity there, along with the activities of other armed groups. Boko Haram has been
conducting its operations from within Cameroon since 2014, triggering the majority of new displacements
recorded in the country each year. A crisis in the North West and South West regions, which began in 2016
known as the Anglophone crisis has accelerated the speed and extent of migration in and out of the country for
the past 4 years.
According to local media, more than 1,500 families have been rendered homeless in the Far North
region since the start of September as a result of heavy rains and flooding (Happi, 2020). According to the
Governor of the Littoral region, approximately 900 families (or 4,410 people) were displaced on August 21st
from the city of Douala (Littoral region) as a result of heavy rain and flooding (Floodlist, 2020).
Migration in Cameroon has an impact on the national economy. Indeed, the transfer of funds by
Cameroonian emigrants helps fight poverty. According to the World Bank, the number of remittances from
Cameroonian migrants was estimated at USD 103 million in 2005 that is 2.5 percent of official development aid.
The amount of funds transferred is constantly increasing. Estimated at USD 11 million in 2000, it rose to USD
100 million in 2004 and USD 167 million in 2008. This amount represents 0.8 per cent of the country’s gross
domestic product (World Bank, 2009).
Remittances in Cameroon are personalised and used for medical care, school fees, rent payments or the
purchase of consumer goods. These transfers also stimulate the country’s economic activity by replacing credit
and other financing methods and facilitating the initiation of projects and other income generating activities.
Remittances significantly reduce the foreign exchange losses caused by deficits in the balance of payments.
Cameroonian migration also has an impact on the labour market. The increase in the transfer of funds
led to the expansion of the banking system and the multiplication of banks and Money Transfer Operators
(MTO), thus generating thousands of jobs. For example, Thanks to migration and remittances many MTO such
as Money Gram, Western Union, Express Union (which is the oldest), have widened their branches and
employed many Cameroonians.
The darker side of emigration is that it leads to brain drain. According to statistics provided by the
Organisation for Economic Co-operation and Development, in 2005 Cameroonian migrants in European
countries numbered 57,050. Some 42.3 per cent of these are thought to be highly qualified. This phenomenon
specifically concerns doctors and academicians.

III. Methodology
This study used the time series data analysis to analyse the impacts of remittances on the economic
growth of Cameroon. The multiple linear regression was used to analyse all the variables; the unit root test was
used to test the variables in order to have an effective model specification. The study covered the period of
1980-2017. Ordinary Least Square was the technique employ for the analytical framework.
The Ordinary Least Squares (OLS) are commonly used to test hypotheses of differences among factor-
level means in repeated measures data, and available in a variety of commercial statistical software packages,
generally under the rubric of general linear model (Ugrinowitsch, Carnevale, Lamas, & Tricoli, 2005).
According to Guidolin and Pedio (2018) this model is the most widely used estimation method applied to a
regression procedure, which displays many desirable properties, listed and discussed below. The Ordinary Least
Square is used to predict values of a continuous response variable using one or more explanatory variables and
can also identify the strength of the relationships between these variables (often referred to as prediction and
explanation).
The model specification for remittances and GDP is of the form:
while that of Remittance paid and GDP is of the form:
and that of Remittance receive and GDP is specified as:
where GDP stands for Gross Domestic Product, REM for remittances, REMPaid is the remittances paid,
REMRec stand for remittances received, FDI represent Foreign Direct Investment, trade openness (imports and
exports), Govexp is for government expenditure, CONS is consumption, POP is the population and u the error
term.
IV. Findings
In this subsection, we carried out the trend analysis; presented the results of the various tests, presented the
descriptive statistics and correlation results and then the regression results.
Trend analysis
The figures below show the trend of all main variables used in this study. That is remittances,
remittance receive, remittance paid, and GDP. The trend of other variables used in our model like Consumption,
education, export, government spending, foreign direct investment, population and trade can be seen in the
appendix.
Figure 1: Trend Analysis for Remittance Paid from 1980-2017

Source: By authors, using data from the World Development Indicator
When looking at the trend of remittances paid, we can notice that the trend was very low from 1980-
2002, during these years the rate of remittances paid was constant, Remittances paid took back a positive growth
trend in 2003 and decreased a bit in 2009. It reached its peak in 2015 and dropped back 2017.
Figure 2: Trend Analysis for Remittances Received from 1980-2017

When we look at the trend of remittances received, we discover that the trend has being greatly
fluctuating. In 1980, the trend of remittances received had a positive drift as it was high, it reached its peak in
1989. The stochastic nature showed that the lowest annual receipts of remittances were recorded in 1995. From
1996-2010, it was constantly fluctuating while from 2010-2017, it had a constant standard speed.
Figure 3: Trend Analysis for Remittances from 1980-2017

When looking at the trend for remittances from 1980-2017 in the figure above, we can notice that the
trend has not being continuously increasing nor continuously decreasing. From 1980-2000, the trend was
constant with a negative drift, in 2004, remittances increased but dropped back in 2005, it rose again in 2007
and decreased again in 2010. Since then, it constantly increased till 2017.

Figure 4: Trend Analysis for GDP from 1980-2017

As concerns the figure above, trend for GDP from 1980-2017, has known a gradual but consistent
increase. Its lowest year was in 1980, followed by 1985 and later on 1995 and 2000. It reached its peak in 2015
and 2017.
The trends on the figures, test for the stationary of the variables used in our model by examining
whether the variables are with trend or without trend. Also, the study investigates if any trend exists, such trend
exhibits random walk with drift or without drift. However, the graphs of the various variables exhibit no
particular trends within our period of study (1980-2017) instead they are stochastic with drift.
Econometric Tests Results

Since this is a time series analysis and the variables are measured in dollars, we log all our variables in
order to make it exhibit a linear regression so as to avoid spurious results. This is because time series data and
their analysis are subject to various econometric problems. It is therefore incumbent to conduct the tests for
these problems to find out whether our variables are good for estimation and if results obtained from them are
good for policy prescriptions. Below are the results of the tests for multicollinearity, Unit Root or stationarity,
autocorrelation and the test for heteroskedasticity.
Test for Multicollinearity

Multicollinearity between independent variables of the model for this research was tested using the Correlation
Matrix. The results of this are as presented below.
Table 1: Correlation Matrix Results

The results show that there exist a weak but positive relationship between remittance paid and
remittance and GDP (0.2705). There exit a positive and strong relationship between education and consumption
(0.7126), thus to avoid multicolinearity, these two variables should not appear on the same model. Thus, we
drop education in our final regression analysis.
Table 2: Correlation Matrix of Remittance Receive and GDP

logGDP~1 log~c_d1 logcon~1 logedu~1 logexp~1 logFD~d1 loggov~1
logGDP_d1 1.0000
logremrec_d1 0.1698 1.0000
logcon_d1 0.8781 0.0831 1.0000
logedu_d1 0.8010 0.1667 0.7126 1.0000
logexport_d1 -0.3114 -0.1390 -0.4225 -0.3596 1.0000
logFDI1_d1 0.1113 -0.5680 0.1189 0.0235 0.1423 1.0000
loggovexp_d1 0.3833 -0.0174 0.2808 0.5145 -0.0728 0.1514 1.0000
logpop_d1 0.0923 0.0103 0.0466 0.0882 0.0599 0.0773 0.1263
logtrade_d1 -0.6001 -0.0867 -0.5659 -0.5301 0.4560 0.0213 -0.1675
logpop~1 logtra~1
logpop_d1 1.0000
logtrade_d1 -0.1552 1.0000
The results on table 2 equally show that, there exit a weak but positive relationship between remittances
receive in Cameroon and remittance and GDP (0.1698). There equally exit a positive and strong relationship
between education and consumption (0.7126), thus to avoid multicollinearity, these two variables should not
appear on the same model.
To confirm the test of multicollinearity, we go further to do the vif test.
Table 3: VIF Results
Variable VIF 1/VIF
logedu_d1 2.89 0.345860

logcon_d1 2.63 0.379730
logtrade_d1 2.37 0.422373
logrempaid~1 1.90 0.527069
loggovexp_d1 1.66 0.601452
logexport_d1 1.43 0.700062
logpop_d1 1.14 0.878240
logFDI1_d1 1.14 0.880266
Mean VIF 1.89

The VIF test results on table 3 show that Multicollinearity doesn’t exist as most of the variables in the
VIF are less than 5. To test for stationarity, we run a spurious regression to check if the variables are stationary
by comparing them with durbin Watson. The results show that it is stationary since the R square is greater than
Durbin Watson after running a normal regression. That is; R square (0.8556) is lesser than a Durbin-Watson d-
statistic (9,37) = 1.970811. The rule of thumb states that when r square is greater than the Durbin Watson then
the results are non-stationary and so we have to make it stationary without which the regression will be spurious
and cannot be used for forecasting or recommendation. In our case the R square is less than the Durbin Watson
so our time series variables are stationary. But for the sake of clarity, we will do the Durbin Watson test to
confirm their level of stationary as follows; Durbin-Watson d-statistic (9,37) = 2.199219 greater than R-squared
= 0.8619so it is stationary for remittance received and Durbin-Watson d-statistic (9,37) = 2.071043 greater than
R-squared = 0.8604 for remittance paid confirming the stationary of our results.
Test for Autocorrelation
Apart from the Durbin Watson test we equally used the Breusch-Godfrey to test for autocorrelation.
Table 4: Breush-Godfrey Test

. estat bgodfrey
Breusch-Godfrey LM test for autocorrelation
lags(p) chi2 df Prob > chi2
1 0.004 1 0.9469
H0: no serial correlation
The hypothesis in this case is:

Since from the above table, chi2 is greater than 0.05 or 5%, the null hypothesis can be accepted. In other words,
there is no serial correlation between the residuals in the model. Therefore, we will not correct for the violation
of the assumption of no serial correlation.
Test for Unit Root

Also, time series data can suffer from the problem of non-stationarity. To check for this, the
Augmented Dickey-Fuller (ADF) test has been employed. However, the variables of the model for this study
were found not to be stationary at levels. To solve this problem, they were differenced by a year. It should be
noted that a variable is said to be stationary when the absolute value of its statistical test is greater than its
critical value. We thus differentiated it before our variables could be stationary because they weren’t stationary
at the first difference.
Table 5: Results of the ADF Test for Unit Root at First Difference
VARIABLES DF test 1% 5% 10% Remark
GDP -4.325 -4.288 -3.560 -3.216 Stationary at First Difference
Consumption -4.461 -4.288 -3.560 -3.216 Stationary at First Difference
Export -6.096 -4.288 -3.560 -3.216 Stationary at First Difference
FDI1 -7.291 -4.288 -3.560 -3.216 Stationary at First Difference

Government
-4.634 -4.288 -3.560 -3.216 Stationary at First Difference
expenditure
Remittances paid -4.949 -4.288 -3.560 -3.216 Stationary at First Difference
Remittances
-4.876 -4.288 -3.560 -3.216 Stationary at First Difference
received
Remittances -7.784 -4.288 -3.560 -3.216 Stationary at First Difference
Population -7.167 -4.288 -3.560 -3.216 Stationary at First Difference
Trade -4.335 -4.288 -3.560 -3.216 Stationary at First Difference

Test for Homoskedasticity

The Breusch-Pagan / Cook-Weisberg test has been applied to test for heteroskedasticity. Breusch-
Pagan test helps to check the null hypothesis versus the alternative hypothesis. A null hypothesis is that where
the error variances are all equal (homoscedasticity), whereas the alternative hypothesis states that the error
variances are a multiplicative function of one or more variables (heteroscedasticity).
Table 6: Breush-Pagan
2
Chi (1) 3.11
2
Prob> chi 0.0776
Table 6 above shows that the probability value of the chi-square 0.0776 statistic is greater than 0.05.
Therefore, the null hypothesis of constant variance can be accepted at 5% level of significance. It implies the
absence of heteroscedasticity in the residuals. If heteroscedasticity is present in the data, the variance differs
across the values of the explanatory variables and violates the assumption. This will make the OLS estimator
unreliable due to bias.
Summary Statistics
Table 7: Summary Statistics
Variable Obs Mean Std. Dev. Min Max
logGDP_d1 37 .0444586 .1236369 -.3798542 .3074341

logrempaid~1 37 .0295043 .15873 -.2558651 .3638954
logcon_d1 37 .0600767 .1543448 -.2738972 .4190731
logedu_d1 37 .0468093 .1567699 -.3845959 .3210449
logexport_d1 37 .0330722 .1144422 -.2074451 .3665447
logFDI1_d1 37 -1.77e+07 2.72e+08 -7.86e+08 7.74e+08

loggovexp_d1 37 .0406977 .0734316 -.1839237 .2452965
logpop_d1 37 .0277404 .0020256 .0249691 .0311794
logtrade_d1 37 -.0078225 .1585151 -.3846734 .4144459
Table 7 gives a brief and summary view of the nature, minimum value, maximum values, mean and
standard deviation of the variables used in this work. On an average, the mean log of GDP, remittance paid,
consumption, education, export, FDI, government expenditure, population and trade in Current US dollars
stands at 0.0445, 0.03, 0.060, 0.047, 0.033, -1.77, 0.041, 0.028 and -0.008 respectively. All standard diversion
figures are considerably low indicating results do not so much divert from their means thus adequate for policy
recommendation.
Presentation of Results on the Relationship between Remittances and GDP using Correlation Matrix
To test for the relationship between Remittance and GDP (objective 1), the correlation matrix was used.
Table 8: Correlation Matrix for GDP and Remittances

LogGDP LogRempaid LogRemrec logRem,
logGDP Pearson Correlation 1 .503** .095 .495**
Sig. (2-tailed) .001 .572 .002
N 38 38 38 38
LogRempaid Pearson Correlation .503** 1 .203 .785**
Sig. (2-tailed) .001 .221 .000
N 38 38 38 38
logRemrec Pearson Correlation .095 .203 1 .248
Sig. (2-tailed) .572 .221 .133
N 38 38 38 38
logRem, Pearson Correlation .495** .785** .248 1
Sig. (2-tailed) .002 .000 .133
N 38 38 38 38
**. Correlation is significant at the 0.01 level (2-tailed).
To investigate the relationship between remittance and GDP, we used the correlation matrix on table 8
above which permits us to the test the individual effect of GDP and remittances. The results show a positive
(0.495) but weak and statistically significant relationship (0.002) between GDP and remittances. Furthermore,
the correlation results show a strong positive (0.95) but statistically insignificant (0.572) relationship between
remittances received and the GDP of Cameroon for the period 1980-2017. In addition, results show a strong,
positive (0.503) and statistically significant (0.001) relationship between remittance paid and GDP at more than
99% confidence level. To further test the relationship of the group effect between remittances as a whole and
GDP, we went further to run the regression result. To confirm this positive result, we will step further to run the
regression analysis on table 4.9 below.

Table 9: Regression Result of Remittances and Other Variables on GDP
Source SS df MS Number of obs = 37

F(7, 29) = 19.83
Model .455191793 7 .065027399 Prob > F = 0.0000
Residual .095107136 29 .003279556 R-squared = 0.8272
Adj R-squared = 0.7855
Total .550298929 36 .015286081 Root MSE = .05727
logGDP_d1 Coef. Std. Err. t P>|t| [95% Conf. Interval]
logrem_d1 .0265534 .0199471 1.33 0.193 -.0142429 .0673497

logcon_d1 .6180483 .0808625 7.64 0.000 .4526658 .7834307
logexport_d1 .1043646 .1001613 1.04 0.306 -.1004883 .3092176
logFDI1_d1 -4.14e-12 3.66e-11 -0.11 0.911 -7.90e-11 7.07e-11
loggovexp_d1 .2606591 .1382154 1.89 0.069 -.0220232 .5433414
logpop_d1 1.251954 4.92431 0.25 0.801 -8.81939 11.3233
logtrade_d1 -.140574 .077938 -1.80 0.082 -.2999752 .0188272
_cons -.0443398 .1364837 -0.32 0.748 -.3234804 .2348007
The results of the group effect of Remittances and other factors put together on GDP is presented on
table 9 above. The constant term is negative (-0.044) indicating that there are still some variables not included
in the model which negatively influence GDP during the study period. Looking at the p-value (0.748), we
observe that it is more than 10%, indicating that the effect of other factors not included in the model on GDP is
not significant even at 10%.
When looking at the effect of the log of the all remittances on GDP, the results gives a positive value
(0.0266), which means that increase in remittance receive will lead to increase the GDP and therefore increase
in the economic growth of Cameroon. Increased remittances by 100% will lead to increase GDP by 2.7%. The
p-value of this result (0.193) however shows a statistically insignificant effect of remittances on the GDP of a
country. This result thus confirms the positive correlation results above. However, the correlation result is
statistically significant. The coefficient of other factors like consumption, export, government expenditure and
population are all positive meaning increase in these variables will lead to increase in the GDP of a country.
Trade and foreign direct investment on the other hand contrary to expectation have a negative coefficient with
GDP meaning increase in the trade and foreign direct investment of Cameroon led to the fall in its GDP. Of all
the variables, only consumption, government expenditure and trade have a statistically significant effect on GDP
during our study period.
The coefficient of multiple determinations (Adjusted R-squared) is 0.8272. This shows that 8s% of the
variation in the GDP of Cameroon during the study period is accounted for by the Variables included in the
model. The F-ratio or F-statistics (0.000) shows that the overall model is statistically significant at 1% percent
level of significance. We can thus conclude that our result is 99% reliable and can be conveniently used for
policy recommendation.
Presentation of the Effect of Remittances Paid and GDP

This section presents results of the effects of remittances that leave Cameroon to other countries on the
economic growth (GDP) of Cameroon (objective 2) within 1980 -2017.

Table 10: Linear Regression Results

F(7, 29) = 19.36
Model .453308506 7 .064758358 Prob > F = 0.0000
Total .550298929 36 .015286081 Root MSE = .05783
logrempaid~1 .0895794 .0826549 1.08 0.287 -.0794688 .2586277

logcon_d1 .5915917 .0881832 6.71 0.000 .4112368 .7719465
logexport_d1 .1406037 .1006394 1.40 0.173 -.065227 .3464345
logFDI1_d1 -1.35e-11 3.73e-11 -0.36 0.719 -8.98e-11 6.27e-11
loggovexp_d1 .1648995 .1551042 1.06 0.296 -.1523243 .4821233
logpop_d1 1.589666 5.072707 0.31 0.756 -8.785185 11.96452
logtrade_d1 -.1924075 .0905282 -2.13 0.042 -.3775585 -.0072564
_cons -.0509286 .1400836 -0.36 0.719 -.3374317 .2355744
The results of the group effect of remittance paid and other factors put together on GDP is presented on
table 10 above. The constant term is negative (-0.051) indicating that there are still some variables not included
in the model which negatively influence economic growth during the study period. Looking at the p-value
(0.719), we observe that it is more than 10%, indicating that the effect of other factors not included in the model
on GDP is not significant even at 10%.
When looking at the effect of the log of the remittances paid on GDP, the results gives a positive value
(0.09), which means that increase in remittances paid will lead to increase GDP and therefore increase economic
growth. Increased remittances by 100% will lead to increase GDP by 9%. The p-value of this result (0.29)
however shows a statistically insignificant effect of remittances paid on the GDP of the country. This result
confirms the positive correlation results above. However, the correlation results show a statistically significant
result between remittances paid and GDP. The coefficient of other factors like consumption, export, government
expenditure and population are all positive meaning increase in these variables will lead to increase in the GDP
of the country. Trade and foreign direct investment on the other hand contrary to expectation have a negative
coefficient with GDP meaning increase in trade and foreign direct investment of Cameroon led to the fall in its
GDP. Of all the variables, only consumption and trade have a statistically significant effect on GDP during our
study period.
The coefficient of multiple determinations (Adjusted R-squared) is 0.8237. This shows that 82% of the
Presentation of Results on Remittance Received and GDP

This section presents results on the effect of the remittances Cameroonians received from abroad between 1980
and 2017 on the GDP of Cameroon (objective 3).

Table 11: Remittance Received and GDP
F(7, 29) = 20.42
Model .457479861 7 .065354266 Prob > F = 0.0000
Total .550298929 36 .015286081 Root MSE = .05657
logremrec_d1 .0518852 .0326159 1.59 0.122 -.0148217 .1185922

logcon_d1 .6094031 .0804125 7.58 0.000 .4449411 .7738651
logexport_d1 .1264667 .0976012 1.30 0.205 -.0731501 .3260835
logFDI1_d1 3.32e-11 4.42e-11 0.75 0.459 -5.73e-11 1.24e-10
loggovexp_d1 .233488 .1357541 1.72 0.096 -.0441604 .5111363
logpop_d1 -.2569862 4.810793 -0.05 0.958 -10.09616 9.58219
logtrade_d1 -.1473036 .0769868 -1.91 0.066 -.3047594 .0101521
_cons .0010021 .1333006 0.01 0.994 -.2716282 .2736325
The results of the group effect of the remittances received and other factors put together on GDP is
presented on table 11 above. The constant term is positive (0.001) indicating that there are still some variables
not included in the model which positively influence GDP during the study period. Looking at the p-value
(0.994), we observe that it is more than 10%, indicating that the effect of other factors not included in the model
on GDP is not significant even at 10%.
looking at the effect of the log of the remittances received on GDP, the results gives a positive value
(0.052), which means that increase in remittance receive will lead to increase GDP. Increased remittances by
100% will lead to increase GDP by 5.2%. The p-value of this result (0.122) however shows a statistically
insignificant effect of remittances received on the GDP of the country. This result confirms the positive
correlation results above. The coefficient of other factors like consumption, export, foreign direct investment,
government expenditure are all positive meaning increase in these variables will lead to increase in the GDP of a
country. Trade and population on the other hand contrary to expectation have a negative coefficient with GDP
meaning increase in the trade and population of Cameroon led to the fall in its GDP. Of all the variables, only
consumption, government expenditure and trade have a statistically significant effect on GDP during our study
period.
The coefficient of multiple determinations (Adjusted R-squared) is 0.7906. This shows that 82% of the
V. Conclusion And Recommendations

This work was out to investigate the effect of remittances on the GDP of Cameroon. Specifically, this
work sets out to investigate the relationship between the remittances and the GDP of Cameroon; investigate the
effect of remittances paid on the GDP of Cameroon and the effect of remittances received on the GDP of
Cameroon within the period 1980-2017. Correlation results show that, there exist a positive but weak and
significant relationship between remittances and GDP (objective 1). The regression results showing the group
effect of remittances and other variables on GDP show a positive but statistically insignificant effect of
remittances on GDP. The correlation results also show that remittances paid also affect GDP positively and
significantly while its regression results also show a positive but insignificant relationship between them
(objective 2). Both the correlation like the regression results further show that remittances received also has a
positive but statistically insignificant effect on the GDP of the Cameroon (objective 3). Of all factors, and in all
models, only consumption and government expenditure showed a positive and statistically significant effect on
the GDP of Cameroon between the periods of 1980- 2017. Trade on the other hand shows a negative and
statistically insignificant relationship with the GDP of Cameroon. We therefore reject the null hypothesis that
remittances have no statistically significant effect on GDP in Cameroon and accept the alternative, concluding

that Remittances, and remittances paid all have positive and statistically significant effects on the GDP of
Cameroon while remittances received has a positive but statistically insignificant effect on the GDP of
Cameroon within the period of 1980 -2017.
In terms of recommendations, we propose to the Cameroonian government to: create a favourable
atmosphere to facilitate the sending of funds by migrants; to set up solid and reliable institutions capable of
effectively fighting corruption and other forms of fraud; Increase its spending on major infrastructure projects
such as roads, schools, hospitals, and so on.
To banks and Money Transfer Operators, we propose they; moderate their tedious conditions for
sending and receiving money.
To Cameroonians in the diaspora, we propose they mobilise in order to create a Cameroonian
investment and development bank, in order to finance and promote local business projects.
Finally, to recipient families and individuals, we propose they invest the remitted monies in productive
or beneficial activities.
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Ngouneou Wanda Kevin, et. al. “The Effects of Remittances on the Economic Growth of
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IOSR Journal of Economics and Finance (IOSR-JEF)

The Effects of Remittances on the Economic Growth of

DOI: 10.9790/5933-1203025466 www.iosrjournals.org 54 | Page

DOI: 10.9790/5933-1203025466 www.iosrjournals.org 55 | Page

II. Literature Review

DOI: 10.9790/5933-1203025466 www.iosrjournals.org 56 | Page

while that of Remittance paid and GDP is of the form:

and that of Remittance receive and GDP is specified as:

Figure 1: Trend Analysis for Remittance Paid from 1980-2017

Figure 2: Trend Analysis for Remittances Received from 1980-2017

Figure 3: Trend Analysis for Remittances from 1980-2017

DOI: 10.9790/5933-1203025466 www.iosrjournals.org 58 | Page

Figure 4: Trend Analysis for GDP from 1980-2017

Econometric Tests Results

Test for Multicollinearity

Table 1: Correlation Matrix Results

Source: By authors, using data from the World Development Indicator

Table 2: Correlation Matrix of Remittance Receive and GDP

Source: By authors, using data from the World Development Indicator

Table 3: VIF Results

Variable VIF 1/VIF

logedu_d1 2.89 0.345860

Mean VIF 1.89

Table 4: Breush-Godfrey Test

Breusch-Godfrey LM test for autocorrelation

lags(p) chi2 df Prob > chi2

H0: no serial correlation

The hypothesis in this case is:

Test for Unit Root

GDP -4.325 -4.288 -3.560 -3.216 Stationary at First Difference

Consumption -4.461 -4.288 -3.560 -3.216 Stationary at First Difference

Export -6.096 -4.288 -3.560 -3.216 Stationary at First Difference

FDI1 -7.291 -4.288 -3.560 -3.216 Stationary at First Difference

Population -7.167 -4.288 -3.560 -3.216 Stationary at First Difference

Trade -4.335 -4.288 -3.560 -3.216 Stationary at First Difference

Test for Homoskedasticity

Variable Obs Mean Std. Dev. Min Max

logGDP_d1 37 .0444586 .1236369 -.3798542 .3074341

logFDI1_d1 37 -1.77e+07 2.72e+08 -7.86e+08 7.74e+08

Source: By authors, using data from the World Development Indicator

Table 8: Correlation Matrix for GDP and Remittances

Source: By authors, using data from the World Development Indicator

DOI: 10.9790/5933-1203025466 www.iosrjournals.org 62 | Page

Source SS df MS Number of obs = 37

logGDP_d1 Coef. Std. Err. t P>|t| [95% Conf. Interval]

logrem_d1 .0265534 .0199471 1.33 0.193 -.0142429 .0673497

Source: By authors, using data from the World Development Indicator

Presentation of the Effect of Remittances Paid and GDP

DOI: 10.9790/5933-1203025466 www.iosrjournals.org 63 | Page

Table 10: Linear Regression Results

logGDP_d1 Coef. Std. Err. t P>|t| [95% Conf. Interval]

logrempaid~1 .0895794 .0826549 1.08 0.287 -.0794688 .2586277

Source: By authors, using data from the World Development Indicator

Presentation of Results on Remittance Received and GDP

DOI: 10.9790/5933-1203025466 www.iosrjournals.org 64 | Page

logGDP_d1 Coef. Std. Err. t P>|t| [95% Conf. Interval]

logremrec_d1 .0518852 .0326159 1.59 0.122 -.0148217 .1185922

Source: By authors, using data from the World Development Indicator

V. Conclusion And Recommendations