• Government Capital Expenditure, Recurrent Expenditure and Economic Growth in Ghana

    Author(s):

    Abel Nyarko-Asomani*, Vijay K. Bhasin and Peter B. Aglobitse


    abelasomani@gmail.com or abelasomani@yahoo.com
    2024-08-01 04:47:38

    58 Downloads 85 Views

    Abstract

    This study focuses on a further disaggregated level of public expenditure and their relationship with economic growth in Ghana from 1980-2017. It considered the major sub-components under recurrent expenditure (thus interest-payment and non-interest recurrent expenditure) and the entire capital expenditure. Moving away from the usual ARDL model mostly used in such estimations, we employed a Stock-Watson Dynamic OLS estimation to analyse the government expenditure-economic growth relationship. We further adopted the Granger Causality test to determine the direction of causality among these expenditure variables and economic growth. The results from the estimation confirms capital expenditure as a growth-enhancing variable while non-interest and interest-payments recurrent expenditures are detrimental to the growth of the economy. Hence, it suggests that the government should step-up its capital expenditure especially on projects with significant linkages to other sectors. There should also be effective monitoring of the channels that non-interest recurrent expenditure passes through into the economy. It will also be prudent if government considers an efficient debt management strategy to limit the pace of interest-payment growth in the country.

    Keywords
    Capital expenditure; Recurrent expenditure; Economic growth; Stock Watson Dynamic OLS; Ghana.

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