TITLE:
Financial Development and Economic Growth: Additional Evidence from Ghana
AUTHORS:
Grace Ofori-Abebrese, Robert Becker Pickson, Benjamin Tsatsu Diabah
KEYWORDS:
Financial Development, Economic Growth, ARDL, Granger Causality, Ghana
JOURNAL NAME:
Modern Economy,
Vol.8 No.2,
February
24,
2017
ABSTRACT: Although the finance-growth
relationship has been looked at in many African countries such as
Ghana, the outcomes have been mixed while the causal direction between the two
variables has particularly not been examined. This study, therefore, applied
ARDL approach and Granger causality test to investigating the relationship and the causal direction between
financial development and economic growth in Ghana during the period 1970-2013. The study revealed that the amount of creditfrom domestic sources to the private sector
maintained a positively significant nexus with the growth of the economy
whereas the domestic deposit was
not the case. Also, the results
established that there is a dependence of the Ghanaian economy to the changes
in domestic credit to private sector whilst there
exists a
uni-directional causality
running from the variations in economic growth to the domestic deposit in
Ghana. Consistent with the
findings, it is recommended that the authorities concentrate on improving the
efficiency of the financial system to allow deposits to be channelled to
growth-inducing investments to bring about the long-term growth of the economy.