EXTERNAL DEBT AND ECONOMIC GROWTH IN GHANA: A CO-INTEGRATION AND VECTOR ERROR CORRECTION ANALYSIS

Shuffield Asafo () and Adelajda Matuka ()
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Shuffield Asafo: PhD candidate at the Department of Economics University of Macerata, Italy, Postal: IT
Adelajda Matuka: PhD candidate at the Department of Economics University of Macerata, Italy, Postal: IT

Theoretical and Practical Research in the Economic Fields, 2019, vol. 10, issue 1, 45-53

Abstract: This paper employed a co-integration analysis and an error correction methodology to examine the impact of external debt on economic growth in Ghana using annual time series for the period 1970-2017. We found that external debt inflows spur growth in Ghana both in the long-run and short-run. Secondly, our study also confirmed the crowding out effect and the non-linear effect of external debt in the long run and short-run. However, Debt overhang was only confirmed in the short-run. We advocate for a judicious allocation of the debt resources so that the cost of servicing the debt will not outweigh the benefit of the borrowed funds.

Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:srs:jtpref:v:10:y:2019:i:1:p:45-53

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