Abstract:
Cameroon has been facing a current account deficit since 1987 and will continue to do so in the nearest future. This will imply a net resource drain at a time when long-term capital investment looks bleak given the shift in emphasis of western financial commitment. The country must therefore make urgent moves at arresting this deficit.Increasing exports for Cameroon will be a very difficult task and hence recourse has to be taken to reduce imports. The research therefore sought to find out the factors that influence import demand in the country. The variables that were considered likely suspects on theoretical and empirical ground are, relative price, real Gross Domestic Product, export earnings and money supply. The method of analysis is econometric, the technique multiple regression analysis, the functional form log-linear and the nature of the data time series.The results indicate that the traditional import demand function with relative prices and income as explanatory variables significantly account for variations in the level of imports in Cameroon. Export earning and money supply also proved to be significant explanatory variables as they are found to increase significantly the coefficient of determination of the traditional import demand function.
