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.
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