Saani, Mohammed Ridwan; Abdulai, Abdul-Malik; Sali u, Muba ik
A icle
In la ion, public deb and unemploymen nexus in Ghana.
An ARDL analysis
Cogen Economics & Finance
P o ided in Coope a ion wi h:
Taylo & F ancis G oup
Sugges ed Ci a ion: Saani, Mohammed Ridwan; Abdulai, Abdul-Malik; Sali u, Muba ik (2024) :
In la ion, public deb and unemploymen nexus in Ghana. An ARDL analysis, Cogen Economics &
Finance, ISSN 2332-2039, Taylo & F ancis, Abingdon, Vol. 12, Iss. 1, pp. 1-16,
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Infla ion, public deb and unemploymen nexus in
Ghana. An ARDL analysis
Mohammed Ridwan Saani, Abdul-Malik Abdulai & Muba ik Sali u
To ci e his a icle: Mohammed Ridwan Saani, Abdul-Malik Abdulai & Muba ik Sali u (2024)
Infla ion, public deb and unemploymen nexus in Ghana. An ARDL analysis, Cogen Economics
& Finance, 12:1, 2345296, DOI: 10.1080/23322039.2024.2345296
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DEVELOPMENT ECONOMICS | RESEARCH ARTICLE
In la ion, public deb and unemploymen nexus in Ghana. An ARDL
analysis
Mohammed Ridwan Saani, Abdul-Malik Abdulai and Muba ik Sali u
Depa men o Economics, Uni e si y o De elopmen S udies, Tamale, Ghana
ABSTRACT
In ecen yea s Ghana is challenged wi h ising deb , su ging in la ion, and un a o able
unemploymen a es. To mi iga e hei impac on economic p ospe i y he coun y
equi es s a egic policy in e en ions. Using da a om 1990 o 2022, his s udy
a emp s o analyze he ela ionship be ween in la ion, public deb , and unemploymen
in Ghana. The ARDL amewo k was used o es ima e he a iables. A long- un ela ion-
ship be ween public deb and in la ion was es ablished. No ably, in la ion co ela es
nega i ely wi h public deb in bo h sho and long - un. Whiles public deb demon-
s a ed a posi i e co ela ion wi h unemploymen in bo h sho and long- un, emi an-
ces displayed a nega i e long- un co ela ion wi h unemploymen . The s udy sugges s
ha p io i izing domes ic deb s o e o eign deb s could be s a egic o hedge agains
in la iona y isk. Mo eo e , we ecommend a a ge ed in es men in in as uc u e p oj-
ec s and he p omo ion o ag icul u e. These ini ia i es will spu economic g ow h,
engende sus ainable de elopmen and ul ima ely c ea e mo e job oppo uni ies.
IMPACT STATEMENT
This s udy examines he ela ionship be ween in la ion, public deb , and unemploymen
in Ghana and p o ides insigh ul in o ma ion ha is impo an o academic discou se as
well as policy o mula ion. Using he Au o eg essi e Dis ibu ed Lag (ARDL) amewo k
and da a om 1990 o 2022, he s udy unco e s signi ican indings. Fi s o all, i p o es
ha he e is a long un nega i e co ela ion be ween public deb and in la ion, empha-
sizing he need o p uden deb managemen measu es. No ably, he p e e ence o
local deb o e bo owing om ex e nal sou ces appea s o be a possible hedge agains
in la iona y isks. Secondly, he analysis e eals a posi i e long un ela ionship be ween
unemploymen and public deb , highligh ing he signi icance o sus ainable economic
g ow h measu es o coun e ac his ela ionship. To achie e his, i is sugges ed ha a -
ge ed in es men s in in as uc u e is equi ed in key sec o s like ag icul u e and manu-
ac u ing o s imula e economic g ow h and c ea e employmen oppo uni ies.
Fu he mo e, he s udy emphasizes how c ucial i is o imp o e he ade balance by p o-
mo ing expo s. The e ec i e use o ade can educe he bu den o public deb and p o-
mo e p ospe i y. The Ghanaian go e nmen is encou aged by hese indings o p io i ize
domes ic bo owing and ake in o accoun ixed in e es a e loans, o loans denomina ed
in local cu ency in managing he public deb . In he ealm o academic li e a u e, he
s udy en iches he discou se ega ding he mac oeconomic dynamics o de eloping
economies, wi h a ocus on Sub-Saha an A ica. The esea ch p o ides empi ical e idence
o suppo he cu en deba e on deb managemen , in la ion con ol employmen gene -
a ion. The s udy signi ican ly lays he ounda ion o u u e s udies and he de elopmen
o public policies ha p omo e economic s abili y and p ospe i y.
ARTICLE HISTORY
Recei ed 21 No embe 2023
Re ised 4 Ap il 2024
Accep ed 13 Ap il 2024
KEYWORDS
In la ion; public deb ;
unemploymen ; ARDL
analysis
REVIEWING EDITOR
Goodness Aye, Uni e si y o
Ag icul u e, Maku di Benue
S a e, Maku di, Nige ia
SUBJECTS
Economics; Finance; Poli ical
Economy
1. In oduc ion
The d ama ic inc ease in public deb le els o e he pas ew decades is one impo an opic ha has
caugh he a en ion o schola s and policymake s globally, and in pa icula among Sub-Saha an A ican
(SSA) na ions (Ak am, 2016; Beqi aj e al., 2018). The o e all public deb o SSA has g own, ising om
CONTACT Mohammed Ridwan Saani [email protected] Depa men o Economics, Uni e si y o De elopmen S udies, Tamale, Ghana.
ß2024 The Au ho (s). Published by In o ma UK Limi ed, ading as Taylo & F ancis G oup
This is an Open Access a icle dis ibu ed unde he e ms o he C ea i e Commons A ibu ion License (h p://c ea i ecommons.o g/licenses/by/4.0/), which
pe mi s un es ic ed use, dis ibu ion, and ep oduc ion in any medium, p o ided he o iginal wo k is p ope ly ci ed. The e ms on which his a icle has been
published allow he pos ing o he Accep ed Manusc ip in a eposi o y by he au ho (s) o wi h hei consen .
COGENT ECONOMICS & FINANCE
2024, VOL. 12, NO. 1, 2345296
h ps://doi.o g/10.1080/23322039.2024.2345296
an a e age o 27% o GDP in 2010 o o e 59% in 2020 (IMF, 2023). Al hough he GDP o SSA na ions
inc eased by oughly 23% be ween 2010 and 2017, public deb inc eased by mo e han 90% du ing he
same pe iod (Manasseh e al., 2022). The declining pe o mance o a numbe o mac oeconomic meas-
u es, including GDP g ow h a es, exchange a es, unemploymen , in la ion, and s ock ma ke p ices
among o he s may be linked o he ising public deb (Fambeu e al., 2022). In la ion, public deb , and
unemploymen a e h ee o he mos impo an economic indica o s ha a e closely moni o ed by poli-
cymake s, economis s, and in es o s alike. They in e ac and can ha e an immense impac on a na ion’s
s abili y and gene al s a e o he economy. Acco ding o Dumi escu, Enciu, e al. (2022) coun ies wi h
la ge le els o public deb ypically ha e lowe a es o in la ion and mo e unemploymen , while coun-
ies wi h lowe public deb le els end o ha e lowe unemploymen a es and highe in la ion. The
COVID-19 pandemic’s consequences on he global economy, including hose on unemploymen , public
deb , and in la ion, we e examined by he IMF. Acco ding o he epo , he pandemic has led o a no -
able g ow h in public deb , bu i has caused a dec ease in in la ion whiles inc easing unemploymen
(Ozili, 2021). Also, Chiu e al. (2023) asse s ha while he associa ion be ween in la ion, public deb and
unemploymen has changed o e ime, he e is s ill a gene al in e se ela ionship be ween unemploy-
men and in la ion. The o e all inc ease in p ices o goods and se ices o e ime is e e ed o as in la-
ion. In de eloping coun ies, in la ion can be pa icula ly high due o ac o s such as supply-side
cons ain s, mone a y ins abili y, and poli ical unce ain y (Gopina h, 2022). In Ghana, in la ion has been
a pe sis en challenge o e he pas ew decades, wi h a es luc ua ing be ween high and low le els.
Acco ding o he Ghana S a is ical Se ice, he a e age in la ion a e in Ghana be ween 2010 and 2019
was 15.8 pe cen (Sa pong-Kumankoma, 2023). This in la ion has e en inc eased o 38.1% in Sep embe
2023 which is ob iously highe han he cen al bank o Ghana’s a ge band o 8 ± 2% a e. The high
in la ion a e has con ibu ed o an inc ease in he cos o li ing, esul ing o he inabili y o ci izens o
pay o basic necessi ies and leading o a decline in pu chasing powe (Adil e al., 2021). The decline in
pu chasing powe can culmina e o a decline in economic g ow h and an inc ease in po e y le els.
Whiles his in la ion in Ghana is galloping, he coun y is also eco ding unsus ainable deb o GDP le els
con a y o Dumi escu, Enciu, e al. (2022) inding o high public deb co esponding o lowe in la ion
le els. Whiles in la ion a es a e on he ise in Sub-Saha an A ica, Ghana, undoub edly eco ds he high-
es in la ion a e in he ECOWAS sub- egion wi h 45.4%, Sie a-Leone - 37.8%, Nige ia- 20.1% wi h Togo,
Mali, Co e d’I oi e and Bu kina Faso eco ding a mos 5% in la ion a es (S a is a, 2023). A go e nmen ’s
ou s anding obliga ion o i s c edi o s, which includes bonds and loans, is e e ed o as public deb .
Fu u e gene a ions may be bu dened by high le els o na ional deb , c owd ou p i a e in es men , and
lead o iscal imbalances (Ma & Qam uzzaman, 2022). The IMF p ojec s ha Ghana’s public deb would
each 98.72% by he end o 2023, ha ing isen d ama ically o e he pas wo decades om 28.5 pe cen
o GDP in 2010 o 88.8 pe cen in 2022.In Ghana he p o isional g oss public deb a end o he i s
qua e o 2023 s ood a GH¢569.35 billion (US$51.67 billion), ep esen ing 71.1 pe cen o GDP. This
comp ised ex e nal deb o GH¢322.56 billion (US$29.27 billion); ep esen ing 40.3pe cen o GDP, and
domes ic deb o GH¢246.79 billion (US$22.4 billion); which is 30.8 pe cen o GDP (Minis y o Finance,
2023). The ising le els o public deb migh be a ibu ed o se e al ac o s, including high in la ion,
low ax e enue, and ising public expendi u e among o he ac o s. As a esul , Ghana has eques ed a
$3 billion bailou package om he In e na ional Mone a y Fund (IMF) o help add ess i s iscal chal-
lenges and s abilize i s economy. The p og am is expec ed o help he coun y educe in la ion, s abilize
he local cu ency, and imp o e he iscal posi ion (Salman & Ali, 2022). Acco ding o Changole (2022),
Ghana is es uc u ing i s deb o comple e an IMF escue wo h $3 billion. As Ghana es uc u es he
deb , his is expec ed o esul in losses o $427 million, wi h lende s egis e ing bond losses as high as
57% du ing es uc u ing. The IMF bailou equi ed among o he s, a comple ion o a comp ehensi e
deb es uc u ing co e ing domes ic deb and ex e nal deb in addi ion o iscal consolida ion e o s
and o he s uc u al e o ms (G ay e al., 2023). Al hough i is unclea i hese ac ions would be e ec i e
in eaching he s a ed objec i es, hey none heless ma k a signi ican s ep in esol ing Ghana’s deb
c isis and enhancing he long- e m economic p ospec s o he na ion.
The numbe o people who a e willing and able o wo k bu a e unable o ob ain employmen is
e e ed o as unemploymen .Unemploymen can ha e signi ican social and economic cos s, pa icu-
la ly in de eloping coun ies whe e i can lead o po e y and inequali y (Ba be , 2023).
2 M. R. SAANI ET AL.
The ends e eals ha he unemploymen a e in Sub-Saha an A ica was as low as 5.45% in 2008,
which subsequen ly luc ua ed bu ose o 6.798% in 2021. The eco ds show ha o he pas ew yea s
in Sub-Saha an A ica, he unemploymen a e peaked in 2021.The e is an undesi able ac om he
end ha he unemploymen a e has been inc easing since 2008 which emains unheal hy o
he economy o he sub- egion (Obasun, 2023). Unemploymen in Ghana, has been a challenge, wi h
he a e age unemploymen a e be ween 2010 and 2019 being 4.3 pe cen (Mensah, 2023). By he end
o 2023, i is an icipa ed ha Ghana’s unemploymen a e would be 5.00 pe cen . Inc eased po e y, a
slowdown in economic g ow h, and social ins abili y can be caused by high unemploymen a e.
Addi ionally, he unemploymen a e in Ghana emains high, pa icula ly among you h and women. The
unemploymen a e o Ghana in 2022 was 3.5%. This inc eased o 3.60 pe cen in 2023 om 3.50 pe -
cen in 2022 (Ubah e al., 2023). The COVID-19 pandemic has made he si ua ion e en wo se, as many
wo ke s ha e los hei jobs and seen a dec ease in incomes as a esul o businesses being compelled
o shu down o scale back ope a ions (Sha i e al., 2020, p. 19).
In ligh o his, he goal o his s udy is o analyze he con empo aneous ela ionship be ween in la-
ion, public deb and unemploymen in he Ghanaian con ex . This esea ch is signi ican and o iginal
since i seeks o make an exclusi e con ibu ion o he linge ing deba e. The absence o s udies o he
co ela ion be ween in la ion, public deb , and unemploymen is one main esea ch gap in he ex an li -
e a u e. While ea lie esea ch has looked a ew o hese indica o s (Ahu u e al., 2023; Alnaa & Ma ey,
2023; Beqi aj e al., 2018; Mon a i, 2023; P abheesh e al., 2023; Shuaibu e al., 2021), no a emp has
been made o in es iga e in la ion, public deb and unemploymen nexus simul aneously. Mo e so, in
Ghana ew s udies ha e been done which ailed o add ess his lacuna (Aimola & Odhiambo, 2021;
As a o e al., 2023; E ans, 2022). The e is also no ag eemen on which a iable leads and which lags in
he co ela ion chain in ea lie s udies conduc ed in he li e a u e. This s udy will also o e policy ecom-
menda ions gea ed owa d he achie emen o sus ainable de elopmen goal eigh (SDG 8), ha equi e
us o ensu e and p omo e decen wo k and economic g ow h in Ghana. Fu he mo e, o le e age he
bene i s o A ican Con inen al F ee T ade A ea (A CFTA) wi hou inc easing public deb , c ea ing mo e
employmen oppo uni ies, and educing in la iona y p essu es, Ghana would need o ensu e p uden
mac oeconomic managemen . By analyzing he in la ion, public deb and unemploymen nexus wi hin
Ghana’s speci ic con ex , policymake s can de elop s a egies ha mi iga e economic ola ili y, os e
job c ea ion, and suppo sus ainable economic g ow h. Hence, de e mining in icacies among hese a -
iables is c i ical o Ghana especially a a ime when he coun y is deb dis essed and has sough IMF
suppo .
2. Li e a u e e iew
Ghana, a Wes A ican na ion, is among he egion’s economies wi h he quickes a e o g ow h and
has implemen ed a numbe o s uc u al e o ms o lowe unemploymen , in la ion, and public deb .
In la ion, public deb , and unemploymen con inue o be majo obs acles o he na ion’s economic
g ow h and de elopmen despi e hese e o s. The e o e, i becomes impe a i e o policymake s o
comp ehend he in e play be ween, in la ion, public deb , and unemploymen in o de o de elop use ul
economic policies. In a luen na ions, he in e ac ion be ween in la ion, public deb , and unemploymen
has been ho oughly examined, bu li le esea ch has been done on he subjec , no ably in Ghana.
P e ious s udies ha e demons a ed a ela ionship be ween unemploymen , public deb , and in la ion;
any al e a ion in one o hese a iables can ha e a signi ican impac on he o he wo. Fo ins ance,
Olaoye (2023) ound ha in la ion and public deb a e posi i ely ela ed, sugges ing ha a ise in public
deb can lead o an inc ease in in la ion in Sub Saha an A ica .Simila ly, Shuaibu e al. (2021) posi ha
in Nige ia, a long un co ela ion exis s be ween public deb and unemploymen . Unemploymen ises
wi h public deb , al hough ex e nal deb inc eases unemploymen mo e han domes ic deb . Howe e ,
coin eg a ion s udy esul s indica e ha he e is no co ela ion be ween in la ion and public deb .
Meanwhile s udies by Mon an i (2023) ha e p o en ha in la ion and public deb a e posi i ely co e-
la ed in many coun ies. In he same ein, Saungweme and Odhiambo (2021) e ealed ha hei
esea ch e eals e idence ha public deb has a posi i e and no ewo hy in luence on Zimbabwe’s in la-
ion dynamics, especially o e he long- un.
COGENT ECONOMICS & FINANCE 3
Igbe i e al. (2016) disco e ed in hei esea ch ha he e is a long- un posi i e co ela ion be ween
public deb and unemploymen in Nige ia. Speci ically, a 1% inc ease in unemploymen led o a 1.6%
inc ease in unemploymen a e all hings being equal. Howe e , he long- un co ela ion be ween
unemploymen and in la ion was ound o be nega i e. Speci ically, a 1% inc ease in in la ion led o a
0.2% dec ease in unemploymen . An in es iga ion conduc ed by Singh e al. (2018) e alua ed how
India’s GDP and unemploymen a e we e impac ed by in la ion. This analysis sugges s ha al hough
insigni ican , in la ion has a nega i e co ela ion wi h GDP and unemploymen . This con i ms he s udy
by Ahu u e al. (2023) who concludes ha in la ion and unemploymen a e nega i ely ela ed in many
coun ies. Fo o he s udies on public deb . Heimbe ge (2023) analyzes 816 es ima es om 47 p ima y
s udies using me a- eg ession echniques and disco e ed a lack o p oo ha a high public deb - o-GDP
consis en ly c ea es a nega i e g ow h e ec . Con e sely, Aba e (2023) disco e ed ha a signi ican posi-
i e shock in deb p omo es economic g ow h, whe eas a mino nega i e shock has he opposi e e ec .
The indings also show ha deb has a h eshold e ec , which implies ha ; i con ibu es posi i ely o
E hiopia’s economic g ow h a le els much below 66.75% o GDP o 36.27% o GNI. Deb incu ed abo e
hese h eshold le els wo sens he na ion’s economic g ow h.
Ob iously, exis ing esea ch has p o ided aluable insigh in o he in e ac ion be ween in la ion, pub-
lic deb , and unemploymen . In Ghana howe e , some ew s udies ha e no ably s udied he ela ionship
be ween public deb and unemploymen , public deb and in la ion, o public deb and unemploymen .
In ligh o his, limi ed a en ion has been paid o in es iga e he simul aneous in e ac ions and he in i-
ca e dynamics o hese a iables al oge he . Fo ins ance, a s udy by E ans (2022) indica es ha GDP
g ow h and ex e nal deb a e posi i ely co ela ed in Ghana whiles in la ion and unemploymen poses a
nega i e e ec on GDP g ow h. The indings u he demons a e ha GDP dec eased in la ion while
ex e nal deb inc eased i , and ha unemploymen had no impac on in la ion. Acco ding o esea ch by
Owusu-Nan wi and E ickson (2016), al hough he e is a bidi ec ional G ange causali y link be ween pub-
lic deb and GDP in he sho - un, he e is a posi i e and s a is ically signi ican long- un associa ion
be ween public deb and economic g ow h in Ghana.
This pape is unique o se e al easons. Fi s o all, because Ghana has a unique economic s uc u e
any esul s, i any, om esea ch on he ela ionship be ween in la ion, public deb and unemploymen
canno be speci ically applied o Ghana. Secondly, his s udy a emp s o ill he gap in li e a u e by
in es iga ing he in la ion, public deb and unemploymen nexus simul aneously. Thi dly, he go e n-
men has implemen ed a ious policies o e he yea s o add ess se e al socio-economic challenges by
he es ablishmen o he Mone a y Policy Commi ee o ensu e p ice s abili y, he issuance o bonds o
manage public deb , and he implemen a ion o job c ea ion p og ams such as he You h Employmen
Agency a ge ed a educing he unemploymen in he coun y. The e o e, an in es iga ion in o he
nexus be ween in la ion, public deb , and unemploymen in Ghana would p o ide aluable insigh in o
he e ec i eness o hese policies and hei impac on he economy.
3. Me hodology o he s udy
This sec ion p esen s he heo e ical amewo k on he in e play be ween he a iables unde conside -
a ion, he a ious s a is ical ools and packages used o analysis o his s udy. Annual da a spanning
om 1990 o 2023 was ob ained om Wo ld De elopmen Indica o s (WDI) websi e. Fi s and o emos ,
a s a is ically desc ip i e assessmen o he a iables was ca ied ou . Secondly, a es o s a iona i y was
conduc ed by employing he Augmen ed-Dicky-Fulle (ADF) (Dickey & Fulle , 1979) es o all he se ies.
The ARDL me hod was hen applied a e he bound es o coin eg a ion was comple ed. The lags o
all a iables we e selec ed using he Akaike In o ma ion C i e ion (AIC).
3.1. Theo e ical amewo k
The heo e ical basis o he in la ion, public deb , and unemploymen nexus in Ghana is based on he
idea ha in la ion, public deb , and unemploymen a e in e ela ed and ha e a causal ela ionship wi h
each o he . Acco ding o he classical mac oeconomic heo y, public deb is p edic ed o ise as a esul
o high in la ion as he go e nmen ies o inance i s expendi u es (Gu
ene e e al., 2022). Fu he mo e,
4 M. R. SAANI ET AL.
high in la ion can also esul in highe unemploymen as i ms a e unable o adjus hei p ices quickly,
leading o lowe ou pu and employmen (Tes aselassie & Wol e s, 2018). Con e sely, excessi e public
deb can pu upwa d p essu e on in la ion as he go e nmen inances i s deb h ough mone a y
expansion (Kose e al., 2022). High le els o public deb can also esul in lowe g ow h and highe
unemploymen as esou ces a e di e ed away om p oduc i e uses o se ice he deb (Nupehewa
e al., 2022).
3.2. Empi ical model speci ica ion
Upon e i ying he exis ence o long- un ela ionships be ween all he a iables, we plausibly p oceeded
o es ima e he ARDL model. Ou i s model was o es ima e he e ec o in la ion on public deb which
is speci ied as ollows:
PD ¼ INF,BD,EXR,GDP,TR
ðÞ
:::::::::::::::::::::: :: (1)
whe e PD ¼Public Deb ðTo al o domes ic and o eign deb as % o GDP)
INF ¼In la ion a e, wi h each a iable desc ibed in Table A1 a he Appendix.
The second model which es ima ed he impac o public deb on unemploymen , is speci ied as ol-
lows:
Unemp ¼ PD,INF,GDP,FDI REM,GCF,
ðÞ
::::::::::::::::::: (2)
Whe e Unemp ¼Unemploymen a e, PD is public deb PD (To al public deb as a pe cen age o
GDP), wi h all o he he a iables de ined in Table A1 a he Appendix. Econome ically, Equa ions (1)
and (2) can be p esen ed in Equa ions (3) and (4) below:
PD ¼a0þa1INF þa2BD þa3EXR þa4GDP þa5TR þe :::::::::::::::::::::: (3)
UNEMP ¼b0þb1PD þb2INF þb3GDP þb4FDI þb5REM þb6GCF þl :::::: (4)
The ARDL was employed due o i s e ec i eness in managing a ying deg ees o in eg a ion and i s
pe cei ed supe io i y o e he con en ional o well-known coin eg a ion models, such as he Engle-
G ange (Engle & G ange , 1987), Johansen es (Johansen & Juselius, 1990), and Phillip-Oulia is es ,
which can simul aneously es ima e sho and long- un es ima es (Is¸ık e al., 2013). The ARDL model has
he bene i o simul aneous es ima ion o sho and long- un pa ame e s. When he se ies a e I (0), I (1),
o a mix o he wo, ARDL can be used. Pesa an (1997) and Oua a a e al. (2004) s a e ha ARDL canno
be applied in cases whe e any a iable is s a iona y a I (2) since he esul s will be e oneous. The ARDL
models es ima ed a e speci ied as ollows:
DPD ¼b0þb1PD −1þb2INF −1þb3BD −1þb4EXR −1þb5GDP −1þb6TR −1þX
n
i¼1
c1DPD −i
þX
q
i¼1
c2DINF −iþX
q
i¼1
c3DBD −iþX
q
i¼1
c4DEXR −iþX
q
i¼1
c5DGDP −iþX
q
i¼1
c6DTR −iþe ::::::::::::: (5)
In Equa ion (5),D ep esen s he di e ence ope a o , b0deno es he in e cep e m b1 o b6es ima es
he long- un pa ame e s whiles c1 o c6a e he sho un coe icien s. n epo s he lags o public deb
and q epo s he lags o he eg esso s. To de e mine he sho un coe icien s, he e o co ec ion
model (ECM) is hen es ablished. The ECM unc ion can be s a ed as ollows:
DPD ¼X
n
j¼1
a1PD −jþX
n
j¼1
a2INF −jþX
n
j¼1
a3BD −jþX
n
j¼1
a4EXR −jþX
n
j¼1
a5GDP −jþX
n
j¼1
a6TR −jþhECM −jþl
(6)
whe e his he ECM coe icien , which is essen ially expec ed o be s ongly nega i e and con ols he
a e o adjus men o long- un equilib ium. The e o co ec ion e m known as ECM akes in o accoun
he model’s long- un ep esen a ion (Da ko, 2016).
COGENT ECONOMICS & FINANCE 5
DUNEMP ¼b0þb1UNEMP −1þb2PD −1þb3INF −1þb4GDP −1þb5FDI −1þb6REM −1þb7GCF −1
þX
n
i¼1
h1DUNEMP −iþX
n
i¼1
h2DPD −iþX
n
i¼1
h3DINF −iþX
n
i¼1
h4DGDP −iþX
n
i¼1
h5DFD −i
þX
n
i¼1
h6DREM −iþX
n
i¼1
h7DGCF −iþe (7)
Simila ly, in Equa ion (7),D e e s o he di e ence ope a o , b0 ep esen s he in e cep e m, b1 o
b8de e mines he long un pa ame e s whiles h1 o h6also deno es he sho un coe icien s. Thus, he
ECM unc ion o de e mine he sho un coe icien s can be exp essed as below:
DUNEMP ¼X
n
j¼1
a1UNEMP −jþX
n
j¼1
a2PD −jþX
n
j¼1
a3INF −jþX
n
j¼1
a4GDP −jþX
n
j¼1
a5FDI −jþX
n
j¼1
a6REM −j
þX
n
j¼1
a7GCF −jþcECM −1þl :(8)
whe e cis he coe icien o he e o co ec ion e m, which ough o be nega i e and signi ican . The
ECM p o ides a me ic o he speed o adjus men o he long- un. Following he es ima ion o he
long and sho - un coe icien s, he model is subjec ed o pe inen diagnos ic and s abili y es s o
make su e i is s able, de oid o se ial co ela ion, and he e oskedas ici y.
3.3. Da a analysis and discussion o indings
Annual ime-se ies da a om 1990 o 2022 we e used in he analysis. The a iables we e subjec ed o a
desc ip i e analysis in o de o demons a e hei dis ibu ion and ends. Public deb had he second-
highes mean alue in Table 1 below, a 58.97, behind ade wi h 72.897. This poin s o Ghana’s
ex emely high and e a ic le els o na ional deb o e he pe iod o he s udy. Such amoun s o public
deb may esul om bo owing o und iscal sho alls o he inancing o in as uc u e p ojec s. The
na ion’s a e age budge de ici was 5.908%, indica ing a iscal imbalance and a po en ial inclina ion o
bo ow money o co e he sho all. The exchange a e u ned ou o be he leas ola ile a iable,
whe eas public deb was he mos ola ile. In e ms o s anda d de ia ion, which measu es how dis-
pe sed he obse ed a iables a e om hei mean. The cos -o -li ing index, o in la ion, eco ded a
mean o 18.762% o he pe iod, wi h signi ican p ice luc ua ions be ween 6.698% and 59.317%. A
numbe o a iables, including excessi e g ow h o money supply, supply chain dis up ions, o ex e nal
shocks, may be esponsible o he high in la ion and ising cos o li ing. Ghana’s unemploymen a e
luc ua ed be ween 2.170% o 10.460%, wi h a mean o 5.53%, e lec ing a ela i ely s able a e. The
coun y’s a e age GDP was 5.247%, signi ying good economic g ow h and p omising u u e p ospec s
o he na ion. Fu he mo e, he a e age amoun o emi ances ecei ed by Ghana (2.342) was less han
FDI (3.895), which was also less han g oss capi al o ma ion (20.179). This sugges s ha while g oss cap-
i al o ma ion has con ibu ed mode a ely o Ghana’s economic g ow h h oughou his ime, FDI and
emi ances ha e con ibu ed e y li le. Finally, wi h a mean o 1.917 and a s anda d de ia ion o 1.796,
Table 1. Desc ip i e s a is ics o a iables.
Va iable Obse a ion Mean Maximum Minimum S d. de
PD 33 58.970 111.945 26.216 19.743
INF 33 18.762 59.317 6.698 11.794
UNEMPT 33 5.536 10.460 2.170 2.142
TR 33 72.897 116.048 38.517 19.466
REM 33 2.342 10.085 0.094 2.721
GDP 33 5.247 14.047 0.514 2.483
GCF 33 20.179 29.002 11.764 4.854
FDI 33 3.895 9.466 0.251 2.692
EXR 33 1.917 5.712 0.680 1.796
BD 33 −5.908 −1.590 −17.440 3.272
Sou ce: Au ho ’s cons uc , 2023.
6 M. R. SAANI ET AL.
he exchange a e was he mos s able a iable, while ade was ound o be he mos ola ile, wi h a
mean o 72.897 and a iance be ween 38.517 and 116.048.
The end o hese a iables was also obse ed and assessed o e he pe iod, which is depic ed in Figu e
1below. Be o e 1992 we obse ed a decline in in la ion. Subsequen ly, he e was a dip in in la ion in 1992.
Bo h in la ion and public deb we e posi i e, inc eased s eadily om 1992 o 1996 and u ned nega i e wi h
a decline un il he yea 1999 when he e was a dip in bo h economic a iables. These wo a iables became
posi i e, and made a s eady inc ease un il 2001 when hey peaked and he ea e declined un il 2002. A e
2002, in la ion u ned s ochas ic, and modes ly posi i e un il 2021 o 2022 when i became explosi ely posi-
i e. This ise in in la ion could be a ibu ed o high go e nmen spending in elec ion 2020, and he ob ious
dis up ion o supply chains wi h he associa ed sho ages and p ice hikes o impo s esul ing om he
COVID-19 pandemic. Howe e , public deb ends o dec ease sha ply om 2000 ill 2006, inc eased s eadily
he ea e un il 2016 and began o decline mode a ely ill 2021. This sha p decline in he public deb om
2000 could be explained pe haps by he change in go e nmen and he decla a ion o Ghana as a highly
indeb ed coun y (HIPIC), g an ing Ghana he oppo uni y o ha e mos o he deb canceled.
Unemploymen o e he pe iod emained posi i e and only inc eased modes ly.
3.4. S a iona i y es
To a oid p oducing spu ious eg ession esul s which could be used o analysis and consequen ly o
making economic decisions, i is desi able o conduc s a iona i y es o he se ies. The e o e, he uni
oo es was conduc ed.
0
20
40
60
80
100
120
19901992199419961998200020022004200620082010201220142016201820202022
Ra e
Yea
PD
INF
Unemp
Figu e 1. T end g aphs o a iables.
Sou ce: Au ho s’cons uc , 2023.
Table 2. Resul s o Uni Roo Tes (ADF).
Le el Fo m Fi s Di e ence
ADF ADF
Va iable In e cep P ob In e cep P ob
PD −2.1873 0.2145 −4.5964 0.0009
REM −1.6708 0.4359 −6.7007 0.0000
INF −3.2405 0.0267 −6.1696 0.0000
FDI −1.8962 0.3298 −5.1294 0.0002
EXR −2.2722 0.4326 −4.7583 0.0033
GCF −2.6787 0.0887 −5.4363 0.0001
GDP −3.7145 0.0086 −7.8050 0.0000
UNEMPT −1.2552 0.6368 −4.6641 0.0008
TR −2.4225 0.1438 −6.7538 0.0000
BD −2.1856 0.2151 −3.8477 0.0070
Signi icance a 1% le el.
Sou ce: Au ho ’s cons uc , 2023.
COGENT ECONOMICS & FINANCE 7
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Appendix
Table A1. Va iables and hei measu emen .
Va iable De ini ion Measu emen
PD Public deb To al domes ic and o eign deb as a pe cen age o GDP
INF In la ion a e In la ion as measu ed by he consume p ice index
UNEMPT Unemploymen a e Labou o ce as a pe cen age o o al wo king age popula ion
TR T ade (Openness o he economy) Impo s plus expo s (% o GDP)
REM Fo eign Remi ances ecei ed To al emi ances ecei ed (% o GDP)
GDP G oss Domes ic P oduc Annual pe cen age g ow h a e o GDP a ma ke p ices
GCF G oss Capi al Fo ma ion G oss Capi al Fo ma ion as a pe cen age o GDP
FDI Fo eign Di ec In es men Fo eign Di ec In es men as a pe cen age o GDP
EXR Exchange a e Exchange a e in US dolla s as pe cen age o GDP
BD Budge de ici Budge de ici as a pe cen age o GDP
Sou ce: Au ho ’s cons uc , 2023.
14 M. R. SAANI ET AL.
-15
-10
-5
0
5
10
15
2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
CUSUM 5% Signi icance
-0.4
0.0
0.4
0.8
1.2
1.6
2004 2006 2008 2010 2012 2014 2016 2018 2020 2022
CUSUM o Squa es 5% Signi icance
Figu e A1. S abili y es o Model 1.
COGENT ECONOMICS & FINANCE 15
s abili y
-15
-10
-5
0
5
10
15
02 04 06 08 10 12 14 16 18 20 22
CUSUM 5% Signi icance
-0.4
-0.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
02 04 06 08 10 12 14 16 18 20 22
CUSUM o Squa es 5% Signi icance
Figu e B1. S abili y es o Model 2.
16 M. R. SAANI ET AL.
