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Please use this identifier to cite or link to this item: http://hdl.handle.net/123456789/9249

Title: An empirical analysis of fiscal deficit in Ghana
Authors: Afoakwa, Collins Osei
Issue Date: 14-Oct-2016
Abstract: Persistent fiscal deficit constitute a major problem facing Least Developed Countries (LDCs). In Ghana, fiscal deficits still persists despite the potentials of the Ghanaian economy and efforts made by various governments to reduce the country’s public debt. Therefore, this study attempts to analyze fiscal deficit in Ghana. Specifically, the study seeks to identify the factors determining fiscal deficit and investigate its effect on exchange rate and inflation in Ghana. The bounds testing approach to co-integration and (ECM) error-correction models, developed within an Auto-Regressive Distributed Lag (ARDL) framework is applied to annual data for the period 1980 to 2013 to examine the long-run equilibrium relationship between fiscal deficit and its determinants, exchange rate and its covariates and inflation and its covariates. The results of the bounds test indicate that there exists long-run relationship between fiscal deficit and its determinants, exchange rate and its covariates and inflation and its covariates. The empirical findings from the ARDL model reveal that fiscal deficit in Ghana is affected by international trade, broad money supply and government revenue in the long run, but have no effect on fiscal deficit in the short run. The findings however indicate that GDP, total debt servicing and democracy affect fiscal deficit significantly in both the short and long run. Democracy was found in this study to be an important determinant of fiscal deficit in both the long run and short run while government consumption expenditure was only significant in determining fiscal deficit in the short run. The findings further reveal a robust evidence of a negative effect of fiscal deficit on exchange rate in both the long and short runs whereas the effect of fiscal deficit on inflation is only significant in the short run. Policy implications drawn based on the findings include; enforcing stringent fiscal measures to restrain government spending, targeting higher GDP growth and stimulating export promotion.
Description: A thesis submitted to the Department of Economics, Kwame Nkrumah University of Science and Technology, in partial fulfillment of the requirements for the award of Master of Philosophy Degree in Economics, 2016
URI: http://hdl.handle.net/123456789/9249
Appears in Collections:College of Arts and Social Sciences

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