THE EFFECT OF MONETARY POLICY ON HOUSEHOLD CONSUPTION IN CAMEROON
ABSTRACT
The study investigates the effect of monetary policy on household consumption in Cameroon between 1980 and 2010. The objective of the the study is to find out the relationship between monetary policy on household consumption in Cameroon and to recommend policies to improve on household consumption in Cameroon. The study uses secondary time series annual data from World Bank Group Development indicators for Cameroon.
The work uses economic model showing household final consumption expenditure as a function of monetary and quasi money growth, real interest rate, total reserve and Gross National Income per capita. Given the trends of the variables estimated results indicate that Total reserve as a ratio of GNP and GNI per capita positively and significantly affect household consumption. Monetary and quasi monetary growth has a negative impact on household consumption. Policy makers therefore need to encourage Total reserve and GNI per capita. It is therefore strongly recommended that instrument of monetary policy should be used in the economy as means of influencing household consumption.
Introduction
Monetary policy
Monetary policy is the process by which monetary authority of a country control the supply of money often targeting a rate of interest for the purpose of promoting economic growth and stability. The official goals usually include relative stable price and low unemployment. It is the process by which the government, central bank, or monetary authority of a country control; the supply of money, availability of money, cost of money or rate of interest to attain a set of objectives oriented towards the growth and stability of the economy.
