INTEREST RATE AND PRIVATE INVESTMENT IN A DEVELOPING ECONOMY: THE CASE OF CAMEROON
ABSTRACT
This research work seeks to find out the role of real interest rate on private sector investment in a developing country like Cameroon. This work provides a statistical, economical as well as an econometrical analysis of interest rate, indirect taxes, per capita income and political stability on private investment in Cameroon. This was done by collecting data on the above mentioned variables for a period of 26years; that is from 1980-2005. The ordinary least squares (OLS) technique was employed and the results were used to verify or test the various hypotheses of this study. Based on the results obtained, we observed that while interest rate, per capita income and political stability to an extent have significant effects on the level of private investment in Cameroon, indirect taxes have no significant effect on the level of private investment in Cameroon. It was also realised that other determinants such as the volume of transaction, the volume of loanable funds available, capital flight etc have a significant role in determining the level of real private investment in Cameroon. Form this study it was concluded that for any policy recommendation to be valid interest rate, real per capita income and political stability must be taken into consideration while indirect taxes must not be taken into consideration in an attempt to boost the level of private investment in a developing country like Cameroon.