Abstract
This
paper examines Financial Innovation and the Stability of Real Money Demand in
Cameroon using annual secondary data from the world development indicators
covering the period 1979 to 2018. Relying on the Autoregressive Distributive
Lag Technique (ARDL), financial innovation signalled a negative and significant
effect on real Broad money demand (M2) while real GPD had a positive and
significant effect on real M2 demand. The results echoed from the stability
checks using CUSUM and CUSUMQ techniques indicated that real M2 is stable
despite financial innovations. With the aid of the error correction technique
(ECT), the paper estimates the speed that the market may take to eliminate
exogenous and endogenous shocks in real M2 demand. The study recommends that
authority should use money supply as an instrument of monetary policy since the
demand for real M2 is stable in Cameroon.
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