Open AccessInvestment and Growth Amidst Widening Government Debt: “The Ghanaian Story”
Author(s) -
John Kwaku Mensah Mawutor,
Eric B. Yiadom,
Richard Fosu Amankwa
Publication year - 2019
Publication title -
asian journal of finance and accounting
Language(s) - English
Resource type - Journals
ISSN - 1946-052X
DOI - 10.5296/ajfa.v11i1.14679
Subject(s) - internal debt , debt to gdp ratio , economics , debt levels and flows , external debt , debt , government debt , monetary economics , investment (military) , fungibility , financial system , economic policy , macroeconomics , politics , political science , law
The study revisits the debt-growth nexus and broadens the argument to examine the unique effect of government debt on investment in Ghana. Data from World Development Indicators on the Ghanaian economy were sampled from 1990 to 2015. The empirical results from the Multiple Linear Regression (MLR) suggest an inverse relationship between government debt and economic growth in Ghana. In addition, a percentage increase in government debt reduces investment by 0.65%; implying that government debt harms investment due to fungibility of debt and accompanying debt repayment responsibilities. Policy ramifications resulting from the study are that the Ghanaian government should restructure public debt management to eliminate debt fungibility and reduce debt to GDP ratio as well.