- Title
- The impact of financial developments on economic growth in Ghana: evidence from the manufacturing industries
- Creator
- Brafi, Paul Osei
- Subject
- Economic development -- Ghana
- Subject
- Finance -- Ghana Manufactures -- Finance -- Ghana
- Date Issued
- 2019
- Date
- 2019
- Type
- Thesis
- Type
- Doctoral
- Type
- DCom
- Identifier
- http://hdl.handle.net/10948/37184
- Identifier
- vital:34135
- Description
- This study provides an analysis of financial and growth dynamics with a view to assess the impact of financial development on economic growth in Ghana. The study also examines the extent to which financial developments in Ghana are affecting capital accumulation and industrial sector growth. The analysis was performed by examining the financial development indicators and economic growth data for Ghana over the period from 1965 to 2016. The study was motivated by the theoretical indications that improvements in financial intermediation within the economy can induce growth of the real sector and thus lead to economic growth. There have been notable structural and financial sector reforms in Ghana since the early and late 1980s. The indications in the financial sector portray improvement in the measures of financial development in the post-reform era as compared to the years before. The findings of the study complement existing research findings and information on finance-growth association as well as the influence that finance has on the sources of growth. The study adopted real per capita gross domestic product (GDP) as a measure of economic growth. In addition, three real sector indicators serving as the sources of growth, included; capital accumulation, industrial value-added and manufacturing value added. The analysis also adopts four financial indicators, expressed as percentage shares of GDP, namely; domestic credit to private sector, total domestic credit provided by financial sector, broad money supply and financial sector deposits—as measures of financial development. The analysis of the impact of the financial development on capital accumulation, industrial output growth, manufacturing productivity and economic growth were estimated using the linear regression estimation techniques within the GMM estimation approach. The study, additionally, examined the short-run and long-run impacts of financial development on economic growth indicators by employing the Vector Autoregressive Regression (VAR) within the Autoregressive Distributed Lag (ARDL) approach. The study further assesses the direction of causality between financial development and economic growth indicators using the cointegration and Engle-Granger causality testing approach within VAR models. The Bayesian Vector Auto Regression (BVAR) models were applied to examine the drivers of economic growth and to assess the sensitivity of economic growth to financial development and macro-economic shocks. This assessment was carried out to examine the maximising behaviour of financial development and to find out if there exists threshold point beyond which finance adversely affects economic growth in Ghana. The results showed that credit to private sector shows a strong positive persistence in promoting economic growth in Ghana. The results show that financial development dynamics in Ghana positively affect long run economic growth and further indicate that the rate of impact was relatively higher in the post reform period of 1984 to 2016. The study further found a bi-directional causal association between financial development and economic growth. Regarding the sources of growth, the study found that financial development strongly contributes positively to capital accumulation in the long-term, however, the findings further suggested that, to some extent, the growing size of finance dampens capital formation and economic growth. This suggested the existence of inefficiencies in the expanding size of total credit offered by the financial system in Ghana. The study further found a long-run positive association between financial development and industrial productivity (except for manufacturing) growth in Ghana, with industry growth substantially determined by private credit. The results of the assessment on the sensitivity of economic growth to shocks in financial development indicators show that Ghana ‘s economic growth is, to a larger extent, influenced by domestic credit provided to the private sector. Also, the results showed that economic growth has been highly responsive to macro-economic shocks such as government expenditure and industrial sector growth although industrial growth seems to show a strong negative persistence on Ghana ‘s economy. The results from the analysis of finance and economic growth shows that existence of different optimal growth maximising points domestic credit, broad money, financial sector deposits and the overall financial development ratios as depicted by the various inverted U-shaped relationship between the financial development indicators and economic growth. The optimal size or maximising positions or thresholds for private credit and total credit were found to be at approximately 20.0 per cent and 28.0 per cent of GDP, respectively. On the other hand, the optimal size or minimum positions or thresholds for broad money supply and total financial sector deposits were found to be at approximately 19.0 per cent and 10.0 per cent of GDP, respectively. With regards to broad money supply-to-GDP and financial sector deposit-to-GDP ratios, the respective averages of 23.19 per cent and 13.77 per cent for the period 1965-2015 are higher than the minimum required thresholds of 19.00 per cent and 10.00 per cent, respectively. The findings show that financial developments have a strong positive association with economic growth, but the results also give the indication that although financial development can enhance growth and inefficiencies in the financial system can equally dampen growth at some levels. overall, the study found that financial reforms have positively contributed to economic growth in Ghana and the impacts of financial development on economic growth in Ghana have been higher in the post-reform era. The effect of financial reforms on capital accumulation was not significant although the study established that the impact of structural reforms was strong and adversely affected capital accumulation in Ghana. With regards to the industrial productivity growth, the study found a positive association between financial development and industry growth in Ghana. It was, however, observed that financial reforms have fails to significantly affect growth of industrial productivity and the impact of financial development on industry sector growth in Ghana are low but the sector experienced relatively higher growth in the pre-reform era.
- Format
- xviii, 388 leaves
- Format
- Publisher
- Nelson Mandela University
- Publisher
- Faculty of Business and Economic Sciences
- Language
- English
- Rights
- Nelson Mandela University
- Hits: 2281
- Visitors: 2323
- Downloads: 260
Collections
NMU School for Economics, Development and Tourism
| Thumbnail | File | Description | Size | Format | |||
|---|---|---|---|---|---|---|---|
| View Details Download | SOURCE1 | PAUL OSEI BRAFI Thesis_Final Dec 2018_SubmittedPierre.pdf | 3 MB | Adobe Acrobat PDF | View Details Download |