The Effect of Financial Development on Income Inequality in Ghana: An Application of ARDL Approach.

Abstract

This academic work peeps at the consequence of financial growth on income disparity in Ghana using an Autoregressive Distributive Lag method for the period 1970 to 2012. An Unrestricted Error Correction Technique was adopted to analyse the long and short-run effects of these variables. The goals of the academic work were to uncover the consequence of growing financial sector and financial unpredictability on income disparity in Ghana. The experimental outcomes discovered that the outcome of financial expansion on the disparity of income has a regression coefficient of -0.94, but was found to be statistically inconsequential in the long-run. Additionally, the outcome of development in the financial sector on the disparity of income has a regression coefficient of 0.65 and statistically substantial at 5 percent in the short-run. The outcome also revealed that the consequence of financial instability on the disparity of income has a regression coefficient of 0.04, but was found to be inconsequential in the long-run. Also, the consequences shown that the consequence of financial instability on the disparity of income has a regression coefficient of 0.03 and was statistically substantial in the short-run. The study, therefore, commends an enabling policy to widen the inclusion of financial access. These policies consist of procedures aimed at decreasing intermediation charges. Additionally, an independent debt audit committee must be set up by the government to analyse information released by all financiers on how much money is owed to whom, under what conditions and terms and in what manner the money released was destined to be used for. Keywords and phrases: ARDL Approach, Financial Development, Income Inequality.