Agricultural Output and Economic Growth Nexus in Ghana

Abstract

This study explored the relationship between agricultural output and economic growth in Ghana from 1960 to 2016 using monthly data on the Gross Domestic Product (GDP), Gross Capital Formation (GCF), agriculture and inflation. Despite several agriculture-led economic growth programmes that have been implemented by successive governments, including the very recent “Planting for Food and Jobs” to create jobs and boost economic growth, the contribution of agriculture sector output to the Ghanaian economy has been on the decline. The estimation results from the Johansen Maximum Likelihood co-integration and the Vector Error Correction Model (VECM) support evidence of a long-run relationship between agricultural output and economic growth in Ghana. Specifically, the co-integration test reveals that agricultural output and economic growth were found to be moving together in the long run. The Granger causality test showed a unidirectional causal relationship running from agricultural value-added to economic growth but no causal flow from general economic growth to agriculture. This indicates that agriculture is still an engine of economic growth in Ghana and hence requires pro-poor policies to address the numerous challenges.