DETERMINANTS OF EXPORT DIVERSIFICATION IN GHANA

Abstract

The present study examines the determinants of export diversification in Ghana. For this purpose, Theil index is used to estimate the degree of export diversification. The study used annual time series data from 1983 to 2016 to estimate the structural, economic/policy and macroeconomic determinants of export diversification within the Auto Regressive Distributed Lag (ARDL) framework. The results of this study indicated that GDP per capita, real effective exchange rate, trade openness, foreign direct investment and infrastructure, improve export diversification in both the long-run and short-run while terms of trade enhances specialisation. Based on the findings of this study, the study recommended that government should take advantage of the fall in Cedi value by exporting more products to markets with high demand. The Ministry of Trade and Industry should also develop a competitive capacity for trade in order to eliminate principal domestic barriers to international business development, increase its investment in basic and trade-related infrastructure. It is also recommended that the government through the Ghana Investment Promotion Center should invest in promoting a broader variety of FDI opportunities to investors, while also developing other sectors of the economy in order to boost diversification.