Business & Management Studies

Abstract

The study investigates the determinants of economic growth in the presence of structural breaks using the Gregory and Hansen co-integration model in the Ghanaian economy for the period 1971 to 2011. The variables considered as the determinants were financial development, inflation, government expenditure, and trade openness. The empirical findings are in agreement with the existence of co-integration in the presence of structural breaks. The study shows that there are structural breaks that coincide with identified climatic, economic, and political shocks. The finding does not support short-run nexus between growth and the determinants considered in the study. However, financial development, government expenditures, and trade openness are the long-run determinants of growth. In respect of policy, government-initiated structural reforms aimed at ensuring growth is of limited value, since the effect of such reforms on the long-run growth path will be offset by other shocks to the economy. Besides, in other to achieve sustainable economic growth, policymakers should put in place strategies to ensure that the financial sector is properly strengthening, trade is appropriately liberalized and government expenditure is targeted at the productive sector of the economy. Future studies, in line with the focus of the current study, based on panel cointegration, accounting for structural beaks effect, is worth embarking on.