Government Spending Multipliers in Ghana: A Local Projections Approach

Research on fiscal multipliers in sub‐Saharan Africa is a largely unexplored topic, with few country‐specific studies. Consequently, it has typically been assumed that the region has low fiscal multipliers, based on evidence from other developing countries rather than direct empirical analysis. This paper aims to address this literature gap, by estimating and analysing the cumulative fiscal multipliers for government consumption and government investment in Ghana, using quarterly data from 2006Q1 to 2025Q4. The local projections methodology is employed. Results show that the economy of Ghana is responsive to fiscal stimuli: The 1‐year multiplier for government consumption is 0.89, remaining relatively stable at 0.84 over a 2‐year horizon. In contrast, the multiplier for government investment is never significant, a difference largely attributable to a higher import content of investments. However, when isolating the domestically financed component of public investment, we find evidence of a significant medium‐term effect: The multiplier is 0.73 (non‐significant) at the 1‐year horizon, rising to 1.79 after 2 years.