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Capital Flows and Economic Growth in Ghana

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  • Edem Kwame Mensah Klobodu
  • Samuel Adams

Abstract

The study examines the differential effects of capital flows on economic growth in Ghana over the period 1970–2014 using autoregressive distributed lag (ARDL). Breakpoint unit root tests are employed to cater for structural change and breaks in time series. Afterwards, these break dates are fed into the ADRL model as dummy variables to allow for the computation of a more robust cointegrating vector. The findings indicate that in both the short and long run capital flows (i.e. FDI, aid, and external debt) have negative effects on economic growth. However, remittances exhibit positive insignificant elasticity in all the regressions. Further, the empirical results show that while the impact of trade, gross capital formation and population growth on growth are mixed, that of inflation is negative. The results of the study are consistent with the idea that the impact of capital flows in Africa has been exaggerated.

Suggested Citation

  • Edem Kwame Mensah Klobodu & Samuel Adams, 2016. "Capital Flows and Economic Growth in Ghana," Journal of African Business, Taylor & Francis Journals, vol. 17(3), pages 291-307, September.
    • Handle: RePEc:taf:wjabxx:v:17:y:2016:i:3:p:291-307
    DOI: 10.1080/15228916.2016.1169784
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    2. Friday Osemenshan Anetor, 2020. "Foreign Capital Inflows, Financial Development and Growth In Nigeria: A Structural VAR Approach," Journal of Developing Areas, Tennessee State University, College of Business, vol. 54(3), pages 69-86, July-Sept.
    3. Bakari, Sayef, 2017. "Why is South Africa Still a Developing Country?," MPRA Paper 80763, University Library of Munich, Germany.
    4. Carolyn Chisadza & Mduduzi Biyase, 2023. "Financial Development and Income Inequality: Evidence From Advanced, Emerging and Developing Economies," Annals of Financial Economics (AFE), World Scientific Publishing Co. Pte. Ltd., vol. 18(01), pages 1-27, March.
    5. Ben-Salha Ousama & Zmami Mourad, 2020. "The impact of private capital flows on economic growth in the MENA region," Economics and Business Review, Sciendo, vol. 6(3), pages 45-67, August.
    6. Hao Chen & Duncan O. Hongo & Max William Ssali & Maurice Simiyu Nyaranga & Consolata Wairimu Nderitu, 2020. "The Asymmetric Influence of Financial Development on Economic Growth in Kenya: Evidence From NARDL," SAGE Open, , vol. 10(1), pages 21582440198, February.
    7. Sayef Bakari, 2017. "The Relationship between Export, Import, Domestic Investment and Economic Growth in Egypt: Empirical Analysis," EuroEconomica, Danubius University of Galati, issue 2(36), pages 34-43, November.
    8. Yilmaz BAYAR & Mahmut Unsal SASMAZ, 2019. "Foreign borrowing, foreign direct investment inflows and economic growth in European Union transition economies," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 10, pages 107-125, December.
    9. Sin-Yu Ho, 2018. "Analysing the sources of growth in an emerging market economy: the Thailand experience," International Journal of Sustainable Economy, Inderscience Enterprises Ltd, vol. 10(4), pages 340-359.
    10. Sin-Yu Ho & Bernard Njindan Iyke, 2020. "The Determinants of Economic Growth in Ghana: New Empirical Evidence," Global Business Review, International Management Institute, vol. 21(3), pages 626-644, June.
    11. Hasdi Aimon & Rika Utami Restihani & Anggi Putri Kurniadi*, 2019. "The Interaction of Macroeconomic Variables on Capital Inflow in Emerging Market Countries in ASEAN: Panel Error Correction Model Approach," The Journal of Social Sciences Research, Academic Research Publishing Group, vol. 5(9), pages 1357-1364, 09-2019.
    12. Ndiweni, Zinzile Lorna & Bonga-Bonga, Lumengo, 2021. "Capital inflows and economic growth nexus in Sub-Saharan Africa: evidence on the role of institutions," MPRA Paper 107392, University Library of Munich, Germany.
    13. Samuel Adams & Edem Kwame Mensah Klobodu & Richmond Odartey Lamptey, 2017. "The Effects of Capital Flows on Economic Growth in Senegal," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 11(2), pages 121-142, May.

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