The effects of short- term foreign debt flows and debt servicing on economic growth in Ghana

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MAY, 2016
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The impact of external debt on economic growth is a contentious issue between economists and academicians- alike since the onset of the debt crisis in the 1980’s. This thesis examineswhethershort- term debt flows and debt servicing affects the economic growth of Ghana. This is carried out by using annual time series data from the period 1990 – 2012. Gross domestic product (GDP) was used as the dependent variable, while the independent variables used in the study were; Short Term External Debt Flow; Gross Fixed Capital Formation; and Labour Force Participation Rate. Two models were stated to examine the two objectives; Model 1 investigated the debt-flows-economic-growth relationship while Model 2 investigated the debt-servicing-economic-growth relationship. The ARDL bounds test technique was adopted to investigate cointegration in both models. The ARDL results showed cointegration among variables in Model 1 but no such evidence was obtained for variables in Model 2.The results indicate that GDP growth is influenced positively by short term flows and negatively by debt servicing.
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 Science Degree in Economics, 2016