Effects of external debt on economic growth in Ghana

Abstract

This study revisits the relationship between external debt and economic growth in Ghana. Using annual data for the period 1986 to 2015, and applying Autoregressive Distributed Lag (ARDL) model and in line with the empirical literature, the study found a statistically significant positive relationship between external debt and economic growth in both the long run and short run for Ghana. The study also revealed that there was adjustment to equilibrium from the short-run. Besides, consistent with the endogenous growth predictions, the study found evidence between economic growth and external debt. The study, therefore, recommends that the government should strategically deepen the external debt of the economy in order to stimulate economic growth in Ghana.