Trade Liberalization and Growth: The Ghanaian Experience

Abstract

This paper examined the impact of trade liberalization policy adopted as part of the Structural Adjustment Program (SAP) on growth rate of real Gross Domestic Product (GDP) of Ghana. The paper used the Autoregressive Distributed Lag approach to estimate the long run and short run parameters for the specified model. Using trade openness as a proxy for liberalization, the study found a positive and significant relationship between trade liberalization and real GDP growth in the long-run in Ghana. Capital stock and population were found to have positive impacts on real GDP growth in both the long-run and short run while Foreign Direct Investment (FDI) was found to have a negative impact on real GDP growth. Inflation though showed a positive relationship with real GDP growth, it was insignificant. The main value of this study is the identification of other key macroeconomic variables that affect the real GDP growth of Ghana.

Keywords: GDP growth, trade liberalization, ARDL, Openness, Ghana