The Nexus between Private Domestic Investment, Economic Instability and Economic Growth in Cameroon

One of the principal concerns of economic policy today in developing countries is the desire to put in place appropriate policies that will render a better business environment and increase economic performance. This paper has as primordial objective, to empirically analyse the nature of the link between domestic investment, economic growth and economic instability in Cameroon from 1977-2014. To realise this objective, data was collected from the World Bank. The principal component analyses technic was used to reduce the key variables and the analyses done using the Vector Autoregressive model following the Toda Yamamoto (1995) specifications. The result from the Toda Yamamoto granger non causality test used shows that there is a unidirectional relationship from private domestic investment to economic growth in Cameroon. Equally, there exist a bidirectional relationship between private domestic investment and economic instability, while a unidirectional link exists from economic growth to economic instability. Consequently, the state of Cameroon should continue to encourage domestic investment and promote small and medium size enterprises so as to acquire higher growth rates.