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Procedia - Social and Behavioral Sciences 235 (2016) 664 – 671

12th International Strategic Management Conference, ISMC 2016, 28-30 October 2016, Antalya,
Turkey

Causality Relationship between Bank Credit and Economic Growth:

Evidence from a Time Series Analysis on a Vector Error Correction
Model in Cameroon
BELINGA Thierrya*, ZHOU Junb, DOUMBE DOUMBE Ericc,
GAHE Zimy Samuel Yannickd, KOFFI Yao Stéphane Landrye
a,b,d
School of Economics, Wuhan University of Technology, 122 Luoshi Road, Wuhan, 430070, China
c
School of International Trade and Economics, University of International Business and Economics
10 Hui Xin Dong Jie, Chaoyang District, Beijing ,100029, China
e
Business School of Xiangtan University, Xiangtan University

Abstract

The study examines the causal relationship between bank credit and economic growth in Cameroon by considering the domestic
credit to the private sector by banks (DCPSB) and bank deposit (BD) as proxies for bank credit development and gross domestic
product per capita (GDPPC) for economic growth. Time series data from 1969-2013 were fitted into the regression equation
using various econometric techniques such as stationarity test Augmented Dickey Fuller (ADF) and Johansen Multivariate
Co-Integration Test. Vector Error Correction Model (VECM) was used to analyze the relationship between bank credit and
economic growth. VECM outcomes show that there is a unidirectional causal relationship flowing from DCPSB and BD to
GDPPC. This result is consistent with a number of earlier studies reviewed in the literature that find causality running from bank
credit to gross domestic product, implying that monetary policies in favor of banking credit will definitely boost the economic
development of Cameroon.

© 2016
© 2016TheTheAuthors. Published
Authors. by by
Published Elsevier Ltd.Ltd.
Elsevier This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/4.0/).
Peer-review under responsibility of the organizing committee of ISMC 2016.
Peer-review under responsibility of the organizing committee of ISMC 2016.
Keywords: Bank Credit, Economic Growth, Causality, Vector Error Correction Model.

Corresponding author. Tel. + 86 15071037282
Email address: tbelinganet@yahoo.fr

1877-0428 © 2016 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY-NC-ND license
(http://creativecommons.org/licenses/by-nc-nd/4.0/).
Peer-review under responsibility of the organizing committee of ISMC 2016.
doi:10.1016/j.sbspro.2016.11.061
 Belinga Thierry et al. / Procedia - Social and Behavioral Sciences 235 (2016) 664 – 671 665

1. Introduction

The positive relationship between financial development and economic growth has been confirmed by many
scholars all over the world. The real issue that remains at the center of the debate is the direction of the causality
relationship between financial development and economic growth. Two directions of causality named supply-
leading and demand-following hypothesis, have been described and demonstrated (Patrick,1966). We have a
unidirectional causality relationship between both financial and economic development, in one side there is the
supply-leading hypothesis postulating that countries with well-developed financial system will grow faster, implying
that financial development causes economic development (Hicks, 1969; Miller,1998), on the other side we have the
demand-following hypothesis stating it is economic growth that prepares a solid ground for financial development
(Gurley and Shaw, 1967; Goldsmith, 1969). Nevertheless, we have another group of scholars who demonstrated an
existing bidirectional causality relationship between finance and economic growth (Demetriades and Hussein, 1996).

To be specific to bank, early economists such as Schumpeter in 1911 presented banks’ role to ease
technological innovation through their intermediary role (King and Levine, 1993). For him, efficient allocation of
savings through identification and funding of entrepreneurs with the best chances of successfully implementing
innovative products and production processes are tools to achieve this objective. Several scholars have supported the
above postulation about the significance of banks to the growth of the economy (King and Levine, 1993; McKinnon,
1973; Shaw, 1973; Fry,1988). While assessing the relationship, using macroeconomic and sector level data such as
the size of financial intermediary, or of external finance related to GPD, it was found that financial development has
a significant positive impact on economic growth (Levine, 2005; De Serres, Kobayakawa, Slok and Vartia, 2006).
Recently, Abdulsalam, Salina and Mohammed (2015) revealed in their research that bank private credit and
domestic private credit contribute significantly to economic growth in the Economic Community of West African
States (ECOWAS), both directly and through their influence on human capital accumulation. These results imply
that providing access to credit to both enterprises and individuals, through appropriate financial policies, will
encourage economic growth in the ECOWAS region.

To analyze the causality relationship between bank credit and economic growth in Cameroon, this study adopts
a multivariate model proposed by Tang in his study of bank lending and economic growth in Malaysia (Bayoumi
and Melander, 2008). The model will help us to determine the direction of causality between real output and the
bank credit. To achieve this purpose we will analyze the long and short run direction of causality using the Vector
Error Correction Model (VECM).

2. Literature Review

The existence of a relationship between finance and growth seems incontestable as many researchers have
worked on the issue and positively confirmed it. What is debatable is the direction of causality between finance and
growth. When causal relationship runs from financial development to growth, it is termed supply-leading because it
is believed that the activities of the financial institutions increase the supply of financial services which creates
economic growth (McKinnon, 1973). Similarly, when the growth within the economy results in increase in the
demand for financial services and this subsequently motivates financial development, then it is termed demand-
following hypothesis (Gurley and Shaw, 1967). There are other scholars who believe that causality runs in both
directions (Demetriades and Hussein, 1996).

2.1. Supply – Leading Hypothesis

The advocates of this theory believe that the banking activities serve as a useful tool to increase the productivity
of a country. They hold that countries with better developed banking system tend to grow faster (Bayoumi and
Melander, 2008). Going through the literature in more detail, the influential study conducted by King and Levine on
seventy-seven countries made up of developed and developing economies using cross-country growth regression,
the results showed that finance not only follows growth; finance seems important to lead economic growth. This
further support the statement that financial services stimulate economic growth (King and Levine, 1993).
666 Belinga Thierry et al. / Procedia - Social and Behavioral Sciences 235 (2016) 664 – 671

2.2 Demand – Following Hypothesis

In spite of the above views, economic growth is sometimes unrelated to banks. According the demand-
following theory, economic growth is a causal factor for banking development. According to the defenders of this
assertion, as the real sector grows, the increasing demand for financial services stimulates the financial sector
(Gurley and Shaw, 1967). Following the same line of argument Goldsmith (1969), using an alternative view of
emphasizing the role of capital accumulation in economic growth and data from 35 countries between 1860 and
1963, he empirically concluded that “a rough parallelism exists between economic and financial development in the
long run”. In her research on the causality relationship between bank credit and economic growth in Nigeria,
evidence from the work of Roseline Oluitan (2012) shows that economic growth causes financial development, but
not vice versa.

2.3 Bi-directional Causality

The proponents of this view state that there is a bi-directional relationship between banking credit and economic
growth. Demetriades and Hussein (1996) conducted a study on 16 less developed countries between 1960 and 1990
using a time series analysis. They observed a long run relationship for indicators of financial development and per
capita GDP in 13 countries. However, they found bi-directional causality in six countries and reverse causality in six.
Odedokun (1998) as well used the ordinary least square method and reported varying degree of effects of bank
development on economic growth for both high and low income groups in the developing countries. Demetriades
and Hussein (1996) postulate that whether financial development causes economic growth, it is important that the
financial system is well functioning. If so, they believe it will assist the real economy to fully exploit available new
opportunities. When there is reverse causation, it is assumed that when the real economy grows, there will be more
savings coming into the financial system, which will allow it to extend new loans.

3. Methodology

In order to study the causality relationship between bank credit and economic growth, we have undertaken a 3-
steps econometric analysis. The first step consists of analysing the stationarity or the integration of the variables
engaged in the model using the Augmented Dickey-Fuller test statistic, then to apprehend the long run association
between the 6 variables, we will run the Johansen Cointegration Test. After admitting the integration and the long
run association of all the variables, we will then be able to move to the last step that is to study the long run and
short run causality using the Vector Error Correction Model.

To reach that goal we will undertake the Vector Error Correction Model to study both the Long Run and Short
Run Causality among the variables mentioned above. The Error Correction Model tested is:

'LOGGDPPCt P  *  L  'LGt 1  Po LGt 1  H t (1)

Where LOGDPPC represents Log of GDP per Capita; μ represents the constant; Γ(L) are polynomials of the
order of k-2; Po are polynomials of the order of k-1 and ε is the error term. The same model applies to other
t
variables namely LOGDCPSB which represents Log of domestic credit to the private sector by banks, LOGBD
representing Log of bank deposits, LOGT is the Log of trade openness, LOGM2 is the Log of the money supply in
the domestic market and LOGER is the Log of the Exchange Rate between USD and XAF. For the multivariate
model of LOGGDPPC and LOGDCPSB, LOGBD, LOGT, LOGM2 and LOGER, the above model can thus be
written as:
Model 1:
 Belinga Thierry et al. / Procedia - Social and Behavioral Sciences 235 (2016) 664 – 671 667

'LOGGDPPCt E1,1  LOGGDPPCt 1  a1 LOGDCPSBt 1  b1 LOGBDt 1  c1 LOGTt 1  d1 LOGM 2t 1  e1 LOGERt 1  D1 

 E2,1'LOGGDPPCt 1  E3,1'LOGGDPPCt 2  E4,1'LOGDCPSBt 1  E5,1'LOGDCPSBt 2  E6,1'LOGBDt 1  E7,1'LOGBDt 2
 E8,1'LOGTt 1  E9,1'LOGTt 2  E10,1'LOGM 2t 1  E11,1'LOGM 2t 2  E12,1'LOGERt 1  E13,1'LOGERt 2  E14,1
(2)

Model 2
'LOGDCPSBt E1,2 ( LOGGDPPCt 1  a2 LOGDCPSBt 1  b2 LOGBDt 1  c2 LOGTt 1  d2 LOGM 2t 1  e2 LOGERt 1  D 2 )
 E2,2 'LOGGDPPCt 1  E3,2 'LOGGDPPCt 2  E4,2 'LOGDCPSBt 1  E5,2 'LOGDCPSBt 2  E6,2 'LOGBDt 1  E7,2 'LOGBDt 2
 E8,2 'LOGTt 1  E9,2 'LOGTt 2  E10,2 LOGM 2t 1  E11,2 'LOGM 2t 2  E12,2 'LOGERt 1  E13,2 'LOGERt 2  E14,2
(3)
Model 3
'LOGBDt E1,3  LOGGDPPCt 1  a3 LOGDCPSBt 1  b3 LOGBDt 1  c3 LOGTt 1  d3 LOGM 2t 1  e3 LOGERt 1  D3 
 E2,3 'LOGGDPPCt 1  E3,3 'LOGGDPPCt 2  E 4,3 'LOGDCPSBt 1  E5,3 'LOGDCPSBt 2  E6,3 'LOGBDt 1  E7,3 'LOGBDt 2
+ E8,3 'LOGTt 1  E9,3 'LOGTt 2  E10,3 'LOGM 2t 1  E11,3 'LOGM 2t 2  E12,3 'LOGERt 1  E13,3 'LOGERt 2  E14,3
(4)
Model 4
'LOGTt E1,4  LOGGDPPCt 1  a4 LOGDCPSBt 1  b4 LOGBDt 1  c4 LOGTt 1  d4 LOGM 2t 1  e4 LOGERt 1  D 4 
 E 2,4 'LOGGDPPCt 1  E3,4 'LOGGDPPCt 2  E4,4 'LOGDCPSBt 1  E5,4 'LOGDCPSBt 2  E6,4 'LOGBDt 1  E7,4 'LOGBDt 2
 E8,4 'LOGTt 1  E9,4 'LOGTt 2  E10,4 'LOGM 2t 1  E11,4 'LOGM 2t 2  E12,4 'LOGERt 1  E13,4 'LOGERt 2  E14,4
(5)
Model 5
'LOGM 2t E1,5  LOGGDPPCt 1  a5 LOGDCPSBt 1  b5 LOGBDt 1  c5 LOGTt 1  d5 LOGM 2t 1  e5 LOGERt 1  D5 
(6)
 E 2,5 'LOGGDPPCt 1  E3,5 'LOGGDPPCt 2  E 4,5 'LOGDCPSBt 1  E5,5 'LOGDCPSBt 2  E6,5 'LOGBDt 1  E7,5 'LOGBDt 2
 E8,5 'LOGTt 1  E9,5 'LOGTt 2  E10,5 'LOGM 2t 1  E11,5 'LOGM 2t 2  E12,5 'LOGERt 1  E13,5 'LOGERt 2  E14,5
Model 6
'LOGERt E1,6  LOGGDPPCt 1  a6 LOGDCPSBt 1  b6 LOGBDt 1  c6 LOGTt 1  d6 LOGM 2t 1  e6 LOGERt 1  D6 
 E 2,6 'LOGGDPPCt 1  E3,6 'LOGGDPPCt 2  E 4,6 'LOGDCPSBt 1  E5,6 'LOGDCPSBt 2  E6,6 'LOGBDt 1  E7,6 'LOGBDt 2
 E8,6 'LOGTt 1  E9,6 'LOGTt 2  E10,6 'LOGM 2t 1  E11,6 'LOGM 2t 2  E12,6 'LOGERt 1  E13,6 'LOGERt 2  E14,6
(7)

For the above models mentioned we will run the Johansen Cointegration test and the Wald test to appreciate the
long run and short run causality relationship between the variables.

4. Findings and Recommendations

4.1. Unit Root Test: Study of the integration of the model variables.
From appendix 1, we draw the conclusion that all the 6 variables become stationary at the first difference. We
can conclude that they are all integrated of order 1 suggesting that we can run the Johansen Cointegration Test to
find out their long run association.

4.2. Cointegration Test: Long run association between the variables.

The results of the Johansen Cointegration Test in appendix 2, reveals that at 5% significance level all our
variables are co-integrated or have a long run relationship. This takes us to the next level of our research that is to
study the Causality between the LogGDPPC and Log DCPSB, LogBD, LogT, LogM2 and LogER.

4.3. Vector Error Correction Model Results

4.3.1. Long-Run Causality with the Johansen Cointegration Test on the VECM:
Model 1 analyses the long run and short run causality relationship flowing from LOGDCPSB, LOGBD, LOGT,
LOGM2 and LOGER to LOGGDPPC.
The hypothesis of the Johansen Cointegration Test is that if β1, j < 0 and P-value < 5% then there is a long run
causality relationship between the Xj and variable Xj+1 flowing from Xj+1 to Xj.
When using Eviews software we input the VECM of model 1 and find that β1,1 = -0.402466 and P-value=
668 Belinga Thierry et al. / Procedia - Social and Behavioral Sciences 235 (2016) 664 – 671

0.0055 (Table 2), meaning that there is a long run causality relationship flowing from domestic credit to private
sector by Banks, bank deposits, trade openness, money supply and exchange rate to gross domestic product per
capita at 5% level of significance. VECM estimates on Models 2, 3, 4, 5 and 6 reveal that there is no long run
causality relationship flowing from GDPPC to DCPSB, BD, T, M2 and ER, since the Error Correction Coefficients
β1,2, β1,3, β1,4, β1,5, and β1,6 are positive and statistically insignificant at 5% and 10% level (Table 2).
In conclusion there is a unidirectional causality relationship from DCPSB, BD, T, M2 and ER to GDPPC
(Table 1). So as predicted by the supply-leading hypothesis that early economists like Schumpeter (1911) have
strongly supported, financial intermediaries led causal relationship between Bank Credit and economic growth in
Cameroon.

4.3.2 Short-Run Causality with the Error Correction Model Test:

To investigate the short run causality relationship between the dependent variable and the independent variables
of our main model 1, we set the following null hypotheses:
Model 1 (2):
E4,1 E5,1 0 , DCPSB do not cause GDPPC in the short run
E6,1 E7,1 0 , BD do not cause GDPPC in the short run
E8,1 E9,1 0 , T do not cause GDPPC in the short run
E10,1 = E11,1 0 , M2 do not cause GDPPC in the short run
E12,1 E13,1 0 , ER do not cause GDPPC in the short run

Model 2,3,4,5,6:
E2,2 E3,2 0 , GDPPC do not cause DCPSB in the short run (3)
E2,3 E3,3 0 , GDPPC do not cause BD in the short run (4)
E2,4 E3,4 0 , GDPPC do not cause T in the short run (5)
E2,5 E3,5 0 , GDPPC do not cause M2 in the short run (6)
E2,6 E3,6 0 , GDPPC do not cause ER in the short run (7)

As we use Wald Test study the above hypotheses we find that it is only the quantity of money (M2) that cause the
gross domestic product per capita(GDPPC) in the short run. The summary of all the results on the short run causality
test are displayed in table 1.

Table 1: VECM with Johansen Cointegration Test and Wald Test

LONG RUN CAUSALITY TEST, SHORT RUN CAUSALITY TEST,
VARIABLES Johansen Cointegration Test Wald Test

Log GDPPC Î Log DCPSB No Causation No Causation

Log DCPSB Î Log GDPPC Causation No Causation

Log GDPPC Î Log BD No Causation No Causation

Log BD Î Log GDPPC Causation No Causation

Log GDPPC Î Log T No Causation No Causation

Log T Î Log GDPPC Causation No Causation

Log GDPPC Î Log M2 No Causation No Causation

Log M2 Î Log GDPPC Causation Causation

 Belinga Thierry et al. / Procedia - Social and Behavioral Sciences 235 (2016) 664 – 671 669

Log GDPPC Î Log ER No Causation No Causation

Log ER Î Log GDPPC Causation No Causation

K = number of lags= 1, N= number of observations= 42, Sample: 1972-2013.
Source: Author

Table 2: Vector Error Correction Estimates:

Variables Coefficient Std. Error t-Statistic Pro. Variables Coefficient Std. Error t-Statistic Pro.
β1,1 -0.402466 0.143244 -2.809650 0.0055 β1,4 0.698202 0.331914 2.103565 0.0369
β3,1 0.072167 0.159674 0.451968 0.6519 β3,4 -0.301785 0.369983 -0.815672 0.4158
β4,1 -0.029446 0.078596 -0.374651 0.7084 β4,4 0.432448 0.182117 2.374565 0.0187
β5,1 -0.152110 0.073314 -2.074759 0.0395 β5,4 0.284147 0.169878 1.672651 0.0963
β6,1 -0.402868 0.180301 -2.234422 0.0268 β6,4 -0.712767 0.417778 -1.706090 0.0898
β7,1 0.089036 0.175471 0.507411 0.6125 β7,4 1.020966 0.406587 2.511066 0.0130
β8,1 -0.082345 0.104261 -0.789802 0.4308 Β8,4 0.310865 0.241584 1.286778 0.1999
β9,1 -0.057165 0.079950 -0.715009 0.4756 β9,4 0.100010 0.185253 0.539858 0.5900
β10,1 0.644478 0.189551 3.400014 0.0008 β10,4 -0.204247 0.439213 -0.465029 0.6425
β11,1 0.189363 0.181373 1.044053 0.2980 β11,4 -0.641011 0.420262 -1.525263 0.1291
β12,1 0.025954 0.073487 0.353178 0.7244 β12,4 0.540202 0.170278 3.172476 0.0018
β13,1 -0.020978 0.063327 -0.331261 0.7409 β13,4 0.086003 0.146736 0.586103 0.5586
β14,1 0.001422 0.003454 0.411630 0.6811 β14,4 -0.001641 0.008004 -0.204975 0.8378
β1,2 0.801738 0.425414 1.884605 0.0612 β1,5 0.015126 0.259621 0.058263 0.9536
β2,2 0.338513 0.487050 0.695027 0.4880 β2,5 -0.449554 0.297236 -1.512451 0.1323
β3,2 0.905176 0.474207 1.908818 0.0580 β3,5 0.629587 0.289398 2.175505 0.0310
β4,2 0.323770 0.233419 1.387075 0.1673 β4,5 0.257634 0.142451 1.808585 0.0723
β5,2 -0.031577 0.217733 -0.145028 0.8849 β5,5 0.015299 0.132878 0.115137 0.9085
β6,2 0.563651 0.535467 1.052635 0.2940 β6,5 -0.178796 0.326784 -0.547139 0.5850
β7,2 -0.176294 0.521123 -0.338297 0.7356 β7,5 -0.034483 0.318030 -0.108428 0.9138
β8,2 0.294032 0.309639 0.949597 0.3437 β8,5 0.067643 0.188966 0.357962 0.7208
β9,2 0.151116 0.237439 0.636442 0.5254 β9,5 0.082003 0.144904 0.565916 0.5722
β10,2 0.026197 0.562940 0.046535 0.9629 β10,5 -0.085744 0.343550 -0.249584 0.8032
β11,2 -0.484388 0.538651 -0.899262 0.3698 β11,5 0.055290 0.328727 0.168193 0.8666
β12,2 -0.242763 0.218245 -1.112338 0.2676 β12,5 0.033640 0.133190 0.252572 0.8009
β13,2 0.221110 0.188072 1.175668 0.2414 β13,5 -0.213060 0.114776 -1.856313 0.0652
β14,2 -0.004001 0.010259 -0.389982 0.6970 β14,5 0.005415 0.006261 0.864931 0.3883
β1,3 0.299813 0.191338 1.566926 0.1190 β1,6 0.744985 0.394723 1.887359 0.0608
β2,3 -0.145091 0.219060 -0.662333 0.5087 β2,6 -0.889917 0.451912 -1.969225 0.0506
β3,3 0.379916 0.213284 1.781271 0.0767 β3,6 0.515084 0.439996 1.170654 0.2434
β4,3 0.285936 0.104985 2.723601 0.0071 β4,6 0.341833 0.216580 1.578324 0.1164
β5,3 -0.180178 0.097930 -1.839870 0.0676 β5,6 0.024169 0.202025 0.119634 0.9049
β6,3 0.060535 0.240837 0.251353 0.8018 β6,6 -0.721066 0.496837 -1.451314 0.1486
β7,3 0.463276 0.234385 1.976559 0.0497 β7,6 0.158497 0.483527 0.327793 0.7435
β8,3 0.091844 0.139266 0.659489 0.5105 β8,6 0.422441 0.287300 1.470380 0.1433
β9,3 0.050409 0.106793 0.472026 0.6375 β9,6 0.513832 0.220309 2.332323 0.0209
β10,3 0.167862 0.253193 0.662982 0.5083 β10,6 -0.672191 0.522327 -1.286915 0.1999
β11,3 -0.025861 0.242269 -0.106743 0.9151 β11,6 -0.017287 0.499791 -0.034588 0.9724
β12,3 0.144578 0.098160 1.472884 0.1427 β12,6 0.412009 0.202500 2.034607 0.0435
β13,3 -0.058032 0.084589 -0.686049 0.4936 β13,6 -0.117931 0.174504 -0.675805 0.5001
β14,3 0.000383 0.004614 0.083029 0.9339 β14,6 0.012524 0.009519 1.315691 0.1901
Source: Author
670 Belinga Thierry et al. / Procedia - Social and Behavioral Sciences 235 (2016) 664 – 671

5. Conclusion and Recommendation:

This research paper aimed to study the causality relationship between bank credit and economic growth in
Cameroon using a time series analysis on a Vector Error Correction Model (VECM). After establishing the
integration and the long run association of all the variables, we have run the Johansen Cointegration Test and the
Wald Test on the Error Correction Model in order to find the direction of causality in the long and short run.
Our findings confirm the outcomes of previous scholars, who found that financial development including
banking credit does cause economic growth (King and Levine, 1993). Thus, bank credit and economic growth nexus
follows the supply – Leading hypothesis in Cameroon in the long run.
Implementing policies that will boost the development of bank credit will definitely have a significant impact
on Cameroon economic development. Among those policies we can recommend that the Banks could provide to
multinational companies, small and medium enterprises and individuals very affordable interest rate to promote
bank credit, but affordable interest rate provided by banks cannot be a reality if the Central Bank of Cameroon is
still charging a high direct interest rate to the banks.
Another policy to be implemented, that will allow banks to give more credit to companies and individuals is the
implementation of some tax incentives, by reducing the tax on the banks’ net income that is very high in Cameroon
(40%).
The quantity of money released on the market does not depend only on Cameroonian officials on the board of
directors in Central Bank, but it has a strong and negative influence of French officials who are also members of the
board of directors of the Central Bank and have the final word before issuing any monetary policy. So another way
to promote bank credit in Cameroon is to have Cameroonians and only Cameroonians deciding themselves on how
much they need and how much they can supply to provide credit to the companies and individuals. As long as we
have the negative influence of France, since that is where Cameroonian Currency is designed, we will not enjoy
strong financial institutions and thus economic breakthrough, as we have just demonstrated that financial
development including bank credit, is a key economic engine to boost the economic development of Cameroon. The
issue of money supply could lead to another key research issue that is to study the impact of the French currency
XAF on the overall economic development in Cameroon.

Appendix:

Appendix 1: Stationarity: Augmented Dickey Fuller Test

Log GDPPC series from 1969 - 2013

Log GDPPC 1st Difference
ADF Prob.
Intercept -4.267309 0.0015
Intercept and Trend -4.297681 0.0075
None -4.240839 0.0001
Log GDCPSB series from 1969 - 2013
Log GDCPSB 1st Difference
Intercept -4.685366 0.0004
Intercept and Trend -4.626404 0.0031
None -4.742012 0.0000
Log BD series from 1969 - 2013
Log BD 1st Difference
Intercept -4.601888 0.0006
Intercept and Trend -4.647509 0.0029
None - 4.539374 0.0000
Log T series from 1969 - 2013
Log T 1st Difference
Intercept -7.018603 0.0000
Intercept and Trend -6.964173 0.0000
None -7.103494 0.0000
Log M2 series from 1969 - 2013
Log M2 1st Difference
Intercept -6.326801 0.0000
Intercept and Trend -6.254383 0.0000
 Belinga Thierry et al. / Procedia - Social and Behavioral Sciences 235 (2016) 664 – 671 671

None -6.349229 0.0000

Log ER series from 1969 - 2013
Log ER 1st Difference
Intercept -5.786120 0.0000
Intercept and Trend -5.716116 0.0001
None -5.813267 0.0000

Appendix 2 Johansen Cointegration Test

Date: 12/25/15 Time: 01:13
Sample (adjusted): 1971 2013
Series: LOGGDPPC LOGDCPSB LOGBD LOGT LOGM2 LOGER
Lags interval (in first differences): 1 to 1
Unrestricted Cointegration Rank Test (Maximum Eigenvalue)

Hypothesized Max-Eigen 0.05

No. of CE(s) Eigenvalue Statistic Critical Value Prob.**

None * 0.607130 40.17388 40.07757 0.0488

At most 1 0.519437 31.51028 33.87687 0.0934
At most 2 0.406462 22.43110 27.58434 0.1991
At most 3 0.192536 9.195829 21.13162 0.8163
At most 4 0.095341 4.308499 14.26460 0.8254
At most 5 0.070817 3.158319 3.841466 0.0755

Max-eigenvalue test indicates 1 Cointegration eqn(s) at the 0.05 level

* denotes rejection of the hypothesis at the 0.05 level
**Mackinnon-Haug-Michels (1999) p-values

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