Investigating Institutional and Expenditure Patterns on Debt and Economic Growth in Ghana

Klenam Sedegah (), Richard Ayisi (), Wassiuw Abdul-Rahaman () and William Baah-Boateng ()
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Klenam Sedegah: Berekuso, Ghana
Richard Ayisi: Accra, Ghana
Wassiuw Abdul-Rahaman: Accra, Ghana
William Baah-Boateng: Accra, Ghana

No 24/008, Journal of Africa SEER Centre(ASC) from Africa SEER Centre(ASC)

Abstract: This study investigates the influence of government expenditure and institutions on public debt accumulation and economic growth in Ghana between 1990 and 2019. The paper examines how public debt is utilized for government spending on capital and recurrent expenditure, and the role bureaucratic quality plays in improving economic growth. The employed estimation technique is structural equation modelling (SEM) because it effectively assesses complex situations and allows modelling complex systems by utilizing simultaneous equations, mediator analysis, and modification indices to improve the goodness of fit of a model. The study indicates that public debt negatively affects GDP growth, while trade openness positively influences GDP growth and public debt accumulation. Bureaucratic quality impacts GDP growth positively and capital expenditure negatively. Recurrent expenditure positively predicts GDP growth and capital expenditure. Capital expenditure's effect on GDP growth is negative but statistically insignificant. The right checks and balances should be implemented to mitigate rent- seeking and corrupt activities associated with bureaucratic quality. Tax revenue mobilization should be improved to reduce budget deficit and borrowing, while export should be promoted through improving local industries. Finally, all infrastructural projects must be completed to serve their purpose.

Keywords: Economic growth; public debt; capital expenditure; recurrent expenditure; quality of bureaucracy; SEM. (search for similar items in EconPapers)
Pages: 30 pages
Date: 2024-01
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Forthcoming in International Social Science Journal

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https://africaseercentre.org/publications/RePEc/db ... -Growth-in-Ghana.pdf Revised version, 2024 (application/pdf)

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