The influence of government expenditure on economic growth in Ghana: An Ardl approach

Abstract

The relationship between public sector expenditure and economic growth for several decades past is still relevant today and continues to be a topic of debate among policy-makers and researchers. We examine the impact of government expenditure on economic growth in Ghana using data from 1970 to 2016, employing ARDL econometric estimation technique. The empirical findings indicate that, government expenditure has a positive relationship with economic growth in the short-run. The results further show that, Gross Capital Formation and Foreign Direct Investment show a significant positive relationship with economic growth in both the short-run and long-run. However, population growth reveals a significant negative relationship with economic growth (GDP Growth). We recommend government to increase public expenditure on profitable projects since it promotes economic growth.

Keywords:

• government expenditure
• economic growth
• Foreign Direct Investment
• ARDL
• Ghana

Disclosure statement

No potential conflict of interest was reported by the author(s).

Additional information

Funding

The authors received no direct funding for this research.

Notes on contributors

Kwasi Poku

Kwasi Poku is a Senior Lecturer in the department of Accounting and Finance, KNUST. He completed his first degree in Development Planning at KNUST. He holds an MBA Finance degree from the University of Leicester and has recently completed his PhD in Finance at the University of the Witwatersrand. He has been teaching undergraduate and postgraduate programs at the KNUST School of Business since 2006. His research interests are in the areas of financial inclusion, financial technology, and corporate finance. He has published articles in reputable journals such as the Cogent Business and Management and International Journal of Social Economics.