Government Spending and Economic Growth in Ghana: Evidence from Granger Causality Analysis

Lucy Anning, Wang Haisu and Joshua Sunday Riti
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Lucy Anning: School of Business Administration, Zhongnan University of Economics and Law, Wuhan, China
Wang Haisu: School of Business Administration, Zhongnan University of Economics and Law, Wuhan, China
Joshua Sunday Riti: Faculty of Social Sciences, Department of Economics, University of Jos, Nigeria

International Journal of Management Science and Business Administration, 2017, vol. 3, issue 2, 50-58

Abstract: In spite of the diverse major issues affecting the economy of Ghana over the years, the economy continues to experience a downward spiral in its economic growth. Taking into account three opining views regarding government spending and economic growth, this study sets to investigate the causal nexus fractious and economic growth in Ghana. We apply the autoregressive distributed lag (ARDL) bounds testing approach to co-integration and the vector error correction model (VECM)-Granger causality test to evaluate both long- and short-run parameters including the direction of causation with data spanning from 1980 and 2015.The empirical results show evidence of co-integration for the existence of a long-run relationship between the dependent and independent variables. The Granger causality tests, in addition, indicated causal independence between government spending and economic growth within the time framework of the study in the economy of Ghana. Government spending has a cause effect on economic growth in Ghana. However, government spending channeled into a more fractious use with the building of resilience and infrastructural development that are self-liquidating if encouraged will enhance economic activities in the short run and also propel growth in the long run in the Ghana.

Keywords: Government Spending; Economic Growth; Granger Causality; Bounds test co-integration; Ghana (search for similar items in EconPapers)
JEL-codes: M00 (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:mgs:ijmsba:v:3:y:2017:i:2:p:50-58

DOI: 10.18775/ijmsba.1849-5664-5419.2014.32.1005

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