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Government Expenditures and Economic Growth dynamics in Ghana

Author

Listed:
  • Adu Frank

    (Kwame Nkrumah University of science and Technology)

  • Ohene-Manu Joseph

    (University of Portsmouth)

  • Ishmael Ackah

Abstract

The duties of government undeniably transcend the making laws. Government spends to provide social amenities, as well as ensuring growth. But while these expenditures have their own benefits, they equally could have shocking ramifications on the economy. The study set out to investigate the impact of government expenditure on economic growth, test the existence of the Wagnerian hypothesis in Ghana as well as to provide evidence on whether government expenditure plays any catalytic role for the growth of private investment by employing the ARDL model and Granger causality test with data spanning from 1970 to 2010. The study concluded that, in the long run government expenditure has a significant positive impact on economic growth but has a negative impact on economic growth in the short run. The study also indicates that government expenditure does not play any supporting role for private investment in Ghana and lastly it was that the Wagnerian hypothesis is valid for Ghana. The study therefore advocates for fiscal discipline and control to keep the government recurrent spending at the optimal level so as to trigger positive ripple effect to other sectors of the economy and avoid the crowding out effect in the Ghanaian economy.

Suggested Citation

  • Adu Frank & Ohene-Manu Joseph & Ishmael Ackah, 2014. "Government Expenditures and Economic Growth dynamics in Ghana," International Journal of Economics and Empirical Research (IJEER), The Economics and Social Development Organization (TESDO), vol. 2(5), pages 180-190, May.
    • Handle: RePEc:ijr:journl:v:2:y:2014:i:5:p:180-190
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    References listed on IDEAS

    as
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    2. Davies, Antony, 2009. "Human development and the optimal size of government," Journal of Behavioral and Experimental Economics (formerly The Journal of Socio-Economics), Elsevier, vol. 38(2), pages 326-330, March.
    3. M. Hashem Pesaran & Yongcheol Shin & Richard J. Smith, 2001. "Bounds testing approaches to the analysis of level relationships," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 16(3), pages 289-326.
    4. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
    5. Engle, Robert & Granger, Clive, 2015. "Co-integration and error correction: Representation, estimation, and testing," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 39(3), pages 106-135.
    6. Jiranyakul, Komain, 2007. "The Relation between Government Expenditures and Economic Growth in Thailand," MPRA Paper 46070, University Library of Munich, Germany.
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    Citations

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    Cited by:

    1. Frederick Forkuo Yeboah, 2022. "The Impact of Capital Budgeting on Economic Growth in Ghana," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 6(12), pages 30-37, December.
    2. John MacCarthy & Paul Muda & Prince Sunu, 2022. "Tax Revenue and Economic Growth Nexus in Ghana: Co-integration and Granger causality Test," Bulletin of Applied Economics, Risk Market Journals, vol. 9(2), pages 15-35.
    3. Megbowon Ebenezer* & Saul Ngarava & Nsikak-Abasi Etim & Oluwabunmi Popoola, 2019. "Impact of Government Expenditure on Agricultural Productivity in South Africa," The Journal of Social Sciences Research, Academic Research Publishing Group, vol. 5(12), pages 1734-1742, 12-2019.

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    More about this item

    Keywords

    Economic growth; Government expenditures; Wagner’s hypothesis; Cointegration;
    All these keywords.

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes

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