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The Impact of Government Debt on the Economic Growth of Ghana: A Time Series Analysis from 1990-2015

Author

Listed:
  • Lucy Anning

    (Zhongnan University of Economics and Law)

  • Collins Frimpong Ofori

    (Zhongnan University of Economics and Law)

  • Ernest Kwame Affum

    (Zhongnan University of Economics and Law)

Abstract

In this study we investigate the impact of government debt on the economic growth of Ghana adopting the methodology of the simple Ordinary Least Squares with data spanning from 1990 to 2015. Ghana has unfortunately found itself in the tragic situation of high external government debt which has led to high dependency on aid and other loans to support its development. These aids and loans have seen the debt of Ghana rise steadily over the years. As a result of the Heavily-Indebted Poor Countries (HIPC) which was presented by the IMF and World Bank in 1999, Ghana was judged to be a HIPC with unsustainable debt enabling the country to benefit from debt relief. We investigate the impact of government debt (both external and domestic) by testing three related models at the domestic and external levels including the general growth of the Ghanaian economy. In constructing our dataset, we build on the study of many scholars including a substantial amount of new materials from both primary and secondary data sources being Ministry of Finance (MOF) or Treasury Latest actual data: Government Finance Statistics Manual (GFSM), Ghana and World Bank. The research findings revealed that there is a negative relationship between debt (domestic and external) and growth in the economy of Ghana and recommend among others that government debt borrowing should be discouraged while increasing the revenue base through tax reform programs is encouraged.

Suggested Citation

  • Lucy Anning & Collins Frimpong Ofori & Ernest Kwame Affum, 2016. "The Impact of Government Debt on the Economic Growth of Ghana: A Time Series Analysis from 1990-2015," International Journal of Innovation and Economic Development, Inovatus Services Ltd., vol. 2(5), pages 31-39, December.
  • Handle: RePEc:mgs:ijoied:v:2:y:2016:i:5:p:31-39
    DOI: 10.18775/ijied.1849-7551-7020.2015.25.2004
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    Citations

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    Cited by:

    1. Usman Saleem Yousaf & Babar Aziz, 2024. "Unveiling the relationship between the optimal debt threshold level and debt-economic growth in selected indebted countries: panel threshold analysis," Quality & Quantity: International Journal of Methodology, Springer, vol. 58(5), pages 5003-5025, October.
    2. Festus, Gift Emmanuel & Saibu, Muibi Olufemi, 2019. "Effect of external debt on Nigerian Economy: Further evidences," MPRA Paper 92704, University Library of Munich, Germany.

    More about this item

    Keywords

    Domestic debt; External debt; Economic growth;
    All these keywords.

    JEL classification:

    • M00 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - General - - - General

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