This paper explores the “financial revolving door” (FRD) hypothesis in Cameroon over the 1970-2010 period, by extending the analysis to other types of capital flows such as the Official Development Assistance (ODA) and Foreign Direct Investment (FDI).

THE INSTITUTIONAL ENVIRONMENT AND THE LINK BETWEEN CAPITAL FLOWS AND CAPITAL FLIGHT IN CAMEROON

This paper explores the “financial revolving door” (FRD) hypothesis in Cameroon over the 1970-2010 period, by extending the analysis to other types of capital flows such as the Official Development Assistance (ODA) and Foreign Direct Investment (FDI). The paper shows that a one-dollar increase in external debt leads to a 47-to-62 cent increase in capital flight. This increase in capital flight mainly stems from changes in the private component of external debt. Capital flight is twice more sensitive to an increase in oil revenues than that in external debt. The paper further underscores the importance of the political and institutional environment. Even though corruption exacerbates the relationship, political and institutional stability helps to mitigate illicit capital outflows arising from an increase in external debt. With regard to the effect on ODA and FDI, the paper found it to be little significant.

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Three strategic priorities

  • Promoting political stability +

    Promoting political stability Strengthening essential capacities to promote political and social stability for transformational change.
  • Regulate the productive sector +

    Regulate the productive sector Build capacity to engage and regulate the productive sector.
  • Monitor the impact of policies +

    Monitor the impact of policies Build capacity to monitor the impact of policies.
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Priority Action Plan

  • Adoption +

    Adoption Adoption of an integrated approach to human capital
  • Optimisation +

    Optimisation Optimisation of the programming and implementation capacities of Cameroon's development policies, projects and programs
  • Rationalisation +

    Rationalisation Rationalisation of institutions in the public sector, the private sector
  • Alignment +

    Alignment Alignment of choices and vision of development with cultural roots and the local environment
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