GOVERNMENT CAPITAL EXPENDITURE, RECURRENT EXPENDITURE AND ECONOMIC GROWTH IN GHANA
Date
2017-06-10
Authors
ASOMANI, ABEL NYARKO
Journal Title
Journal ISSN
Volume Title
Publisher
University of Cape Coast
Abstract
This study sought to find out the relationship between government
expenditure and economic growth in a further disaggregated level in Ghana.
Focusing on the period 1990 to 2015, it considered the major sub-components of
recurrent expenditure (thus non-interest and interest-payment) and capital
expenditure and their relationship with economic growth. Using a quarterlized time
series data, this work employed the Autoregressive Distributed Lag model (ARDL)
to estimate the relationship among these variables of interest. Furthermore, to
establish the direction of causality that lies between these government expenditures
and economic growth, this study resorted to the Granger Causality test to arrive at
the direction of causality among the variables.
Based on the ARDL results, capital expenditure and non-interest recurrent
expenditure promotes economic growth in the long-run period while interestpayments retards economic growth in the all periods. The short-run results show
that capital expenditure and non-interest recurrent expenditure increases economic
growth while the lagged values for capital expenditure decreases economic growth.
The granger causality test indicates a unidirectional causality running from the
government expenditures to economic growth, except for that of interest payment
whereby causality runs from Economic growth to interest-payment expenditure.
Based on the findings, these recommendations were suggested to the
Ministry of Finance: increase funding for capital expenditure, increase and
intensify the monitoring aspect of non-interest expenditure and capping of the
levels of public borrowings within a year to decrease interest-payment burden.
Description
Keywords
Autoregressive Distributed Lag Model (ARDL) , Capital Expenditure Economic