Abstract:
This study investigated the long and short-run impact of external debt on economic growth in the
context of Ghana using the sample period spanning from 1980 to 2016. The study also examined
the Ghana’s external debt trend analysis over the sample period considered for this study.
Theoretical and empirical evidences indicates that external debt can either exert negative or
positive impacts on economic growth depending on how the external funds acquired is injected
into the economy. The variables employed for this were found to be I(0) and I(1) and as result
Autoregressive Distributed Lag bounds test to co-integration econometric technique was
adopted.
The results of this study revealed that the external debt of Ghana has increased by 1,430% from
1980 to 2016. Also, external debt of Ghana was found to have positive significant impacts on
economic growth of Ghana in the long run. The external debt servicing which is the cost of
external debt was found to have negative insignificant impact on growth of Ghana. The study
therefore recommend to policymakers to ensure that all external funding are injected into
productive sectors of the economy in order to stimulate economic growth.
