Monetary Policy and Inflation: Empirical Evidence from Cameroon

Tékam Oumbé Honoré
2018 International Journal of Economics Finance and Management Sciences  
One of the most important goals for all countries is to maintain sustainable growth with low inflation. As a result, each government is fighting high inflation. To stabilize the rate of inflation, it is interesting to study its different sources and monetary policy has one. This study has two objectives: the first objective is to analyze the effect of monetary policy on inflation and the second objective is to examine the nature of the relationship between money supply and inflation in
more » ... This study uses annual time series data from 1980 to 2016. Johansen's cointegration test was used to find the relationship between the money supply and inflation. The ARDL estimation method was used to analyze the effect of the money supply on inflation in Cameroon and the Toda and Yamamoto's causality test was used to test the causality between money supply and inflation. The results show that, there is a long-run equilibrium relationship between the money supply and inflation; the money supply has a positive and significant effect on inflation in Cameroon and there is one-way causality from money supply to inflation. This study shows that inflation has a monetary source in Cameroon. Thus, monetary policy should be planned to maintain price stability by controlling the growth of the money supply in the Cameroonian economy.
doi:10.11648/j.ijefm.20180605.11 fatcat:qpdbrsmxbzcj3g5wafzjiz2rru