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Impact of Macroeconomic Factors on Economic Growth in Ghana: A Cointegration Analysis

Author

Listed:
  • Samuel Antwi

    () (Jiangsu University)

  • Ebenezer Fiifi Emire Atta Mills

    () (Jiangsu University)

  • Xicang Zhao

    () (Jiangsu University)

Abstract

The problem of the study is to ascertain the major macroeconomic factors that would drive Ghana’s real per capita GDP growth (economic growth) and also determine which ways these factors influence economic policy formulation and implementation. As a result, this study examines the long-run macroeconomic factors of economic growth in Ghana using Johansen approach to cointegration which is more appropriate and efficient for determining the number of cointegrating vectors without relying on an arbitrary normalization. The study period spanned from 1980 to 2010. The time series properties of the data were, first, analyzed using the Augmented Dickey Fuller (ADF) test. The empirical results derived indicate that all the variables of interest were stationary after their first differencing. The study found cointegration relationship between real GDP per capita (economic growth) and its macroeconomic factors. The policy recommendation among others is that the government should be able to generate more revenue domestically than relying on foreign aid.

Suggested Citation

  • Samuel Antwi & Ebenezer Fiifi Emire Atta Mills & Xicang Zhao, 2013. "Impact of Macroeconomic Factors on Economic Growth in Ghana: A Cointegration Analysis," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 3(1), pages 35-45, January.
  • Handle: RePEc:hur:ijaraf:v:3:y:2013:i:1:p:35-45
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    References listed on IDEAS

    as
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    2. Levine, Ross & Zervos, Sara J, 1993. "What We Have Learned about Policy and Growth from Cross-Country Regressions?," American Economic Review, American Economic Association, vol. 83(2), pages 426-430, May.
    3. Robert J. Barro, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, Oxford University Press, vol. 106(2), pages 407-443.
    4. Fischer, Stanley, 1993. "The role of macroeconomic factors in growth," Journal of Monetary Economics, Elsevier, vol. 32(3), pages 485-512, December.
    5. Papanek, Gustav F, 1973. "Aid, Foreign Private Investment, Savings, and Growth in Less Developed Countries," Journal of Political Economy, University of Chicago Press, vol. 81(1), pages 120-130, Jan.-Feb..
    6. Stanley Fischer & Franco Modigliani, 1978. "Towards an understanding of the real effects and costs of inflation," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 114(4), pages 810-833, December.
    7. Adenutsi, Deodat E., 2007. "Effects of trade openness and foreign direct investment on industrial performance in Ghana," MPRA Paper 37116, University Library of Munich, Germany.
    8. Deodat E. Adenutsi, 2011. "Financial development, international migrant remittances and endogenous growth in Ghana," Studies in Economics and Finance, Emerald Group Publishing, vol. 28(1), pages 68-89, March.
    9. Frimpong, Joseph Magnus & Oteng-Abayie, Eric Fosu, 2006. "Bivariate causality analysis between FDI inflows and economic growth in Ghana," MPRA Paper 351, University Library of Munich, Germany, revised 09 Oct 2006.
    10. Fosu, Augustin Kwasi, 1990. "Export composition and the impact of exports on economic growth of developing economies," Economics Letters, Elsevier, vol. 34(1), pages 67-71, September.
    11. Robert J. Barro, 2003. "Determinants of Economic Growth in a Panel of Countries," Annals of Economics and Finance, Society for AEF, vol. 4(2), pages 231-274, November.
    12. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-1580, November.
    13. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
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    Keywords

    Ghana; FDI; GDP; Inflation; Economic growth;

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