Exports and Economic Growth: The Case of Ghana

Abstract

The study examined the impact of exports on economic growth in Ghana using annual data for the period 1980 to 2013. Applying popular time series econometric techniques of cointegration and vector error correction estimation, the study sought to explore long-run and short-run relationships between exports and gross domestic product (GDP). The Johansen‟s cointegration test revealed the existence of long-run relationships between real GDP, exports, gross capital formation and labour in Ghana. There was also evidence of bi-directional causality between exports and GDP growth using Granger causality test. The study found that in both the short-run and long-run, real exports and gross capital formation had positive impacts on real GDP. Labour had a negative effect on GDP in the long-run, but it was positively related to real GDP growth in its immediate past year of the short-run. All variables were statistically significant at the 5% significance level in the long-run. The speed of adjustment toward the long-run equilibrium was about 83.5 percent, suggesting that the adjustment is rather rapid. Based on the results, the study recommends that policy makers should focus on maintaining an open and export oriented policy in order to ensure growth in the economy and also to adequately promote economic growth for export expansion.