Sources of International Economic Spillovers to Ghana's Economic Growth

In a world where policy co-ordination among countries is paramount, the growth of one depends on the behaviour of another in terms of policy instruments being pursued. One important question this study sought to answer was whether international economic spillovers emanating from all trading partners mattered for Ghana’s growth. The study therefore investigated the spillover effects emanating from three of the eight key trading partners of Ghana, namely, U.S.A., China and Nigeria. The study was conducted over the variables; technology diffusion; inflation rates and GDP growth of trading partners; labour; and capital, using annual data from 1980 to 2009. The methodology used involved estimating a growth equation for Ghana, capturing the effects and specific sources of spillovers from trading partners. An autoregressive distributed lag (ARDL) model and a vector autoregressive (VAR) model were used in arriving at various spillover effects from trading partners. The results showed that capital, inflation rates of U.S.A, and China’s GDP contributed significantly to Ghana’s GDP growth both in the long-run and the short-run. High spillover effects were observed to emanate from countries with high GDP growth. Another interesting result emphasized the fact that annual GDP growths are independent of each other. Finally, it was observed that spillover effects generally subsided after about fifteen years of persistent shocks.