Financial Development and Exports in Ghana

Abstract

ABSTRACT Using quarterly data from 1990 to 2015, this research explores the association between Financial Development (FD) and exports in Ghana using the Autoregressive Distributed Lag (ARDL) technique and the Granger causality test. The causal research design is employed in studying the variables. The study discovered a one-of-a-kind cointegration association between export and FD. FD, Real Effective Exchange Rate (REER), Foreign Direct Investment (FDI), foreign income and production level all had positive statistically significant influence on exports in both short and long term, according to the regression results. Furthermore, in both short and long run, inflation had a negative statistically significant impact on exports. Findings of the Granger causality test demonstrated bidirectional connection between exports and financial development. Thus, it is advised that the Government and Bank of Ghana are required to put effective financial systems in place to propel growth in exports and also maintain low inflationary rate. In addition, the government must give incentives to encourage FDI. Government must put in place effective macroeconomic policy measures to stabilize the exchange rate, attract more foreign income and increase GDP growth economy