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Revisiting the Finance-growth Nexus in Ghana: Evidence from Threshold Modelling

Author

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  • Kwadwo Boateng Prempeh

    (Sunyani Technical University, Ghana)

  • Joseph Magnus Frimpong

    (Kwame Nkrumah University of Science and Technology, Kumas)

  • Newman Amaning

    (Sunyani Technical University, Ghana)

Abstract

This article examines the non-linearities in Ghana’s finance-growth nexus from 1960 to 2019. A non-linear relationship between finance and growth was established using Hansen’s sample-splitting technique. This suggests that finance contributes to growth only up to a certain level. Beyond that, any further financial development is likely to be detrimental to economic growth. Additionally, the study discovered that the threshold value is conditional on the proxy of finance employed. As a result, it is critical for Ghana to establish its own distinct financial development threshold and work within the optimal level for economic growth promotion and sustainability. This study adds to the body of knowledge by establishing a financial development threshold, which provides policymakers in Ghana with a clear direction for pursuing economic growth and financial development.

Suggested Citation

  • Kwadwo Boateng Prempeh & Joseph Magnus Frimpong & Newman Amaning, 2023. "Revisiting the Finance-growth Nexus in Ghana: Evidence from Threshold Modelling," Acta Universitatis Bohemiae Meridionales, University of South Bohemia in Ceske Budejovice, vol. 26(1), pages 50-70.
    • Handle: RePEc:boh:actaub:v:26:y:2023:i:1:p:50-70
    DOI: 10.32725/acta.2023.004
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