Tax Revenue, Inflation, and Economic Growth: A Ghanaian Perspective

This paper explores the causal influence of tax revenue on economic growth in Ghana. The causality analysis builds on a multivariate setup, allowing for key control variables to intermediate the nexus between tax revenue and economic growth. This enables the paper to overcome variable omission bias, allowing for efficient estimates of the test statistics of the Granger causality. In addition, the paper employs the Toda-Yamamoto test instead of the conventional Granger causality test to avoid pre-testing bias. Using a quarterly dataset which spans the period 1986Q1-2014Q4, we find strong evidence of unidirectional causal flow from tax revenue to economic growth in Ghana. This finding agrees with the existing finding that taxation can influence economic growth. The implication for policy is that the tax scope of the country should be expanded in order to increase the revenue from taxation.

This paper explores the causal influence of tax revenue on economic growth in Ghana. The causality analysis builds on a multivariate setup, allowing for key control variables to intermediate the nexus between tax revenue and economic growth. This enables the paper to overcome variable omission bias, allowing for efficient estimates of the test statistics of the Granger causality. In addition, the paper employs the Toda-Yamamoto test instead of the conventional Granger causality test to avoid pre-testing bias. Using a quarterly dataset which spans the period 1986Q1-2014Q4, we find strong evidence of unidirectional causal flow from tax revenue to economic growth in Ghana. This finding agrees with the existing finding that taxation can influence economic growth. The implication for policy is that the tax scope of the country should be expanded in order to increase the revenue from taxation.

The paper sought to assess the taxes and economic growth nexus in Ghana. The study used annual time-series data collected from 1972 to 2019. The study used the Johansen Co-integration technique, vector error correction model, and Granger causality test to assess the causal relationship between tax revenue and economic growth in Ghana. The Co-integration test was used to establish the long-run relationship. In contrast, the Granger Causality test was used to establish the short-run relationship between the variables used in the model. The study revealed that the model has a speed of adjustment of 61.4% to restore the short-run relationship to the long-run equilibrium path. Furthermore, the study found a unidirectional relationship between tax revenue variables and economic growth. Again, the study found support for a positive and significant nexus between direct tax revenue and economic growth and a significant and negative nexus between indirect tax revenue and economic growth. Based on the results, the study recommends that the government tax policy move gradually from indirect tax revenue concentration to direct tax revenue to finance development programs to sustain economic growth. Keywords: Direct tax; Economic growth; Granger Causality; Indirect tax.

Ghana was the second largest recipient of remittances in West Africa after Nigeria in 2018, with an underlying economic growth rate which declined from 8.1 percent in 2017 to 5.6 percent in 2018 anchored on industrial-sector growth. The study re-examined the effect of inward remittances on economic growth in Ghana. The ARDL estimation technique is used to test for the relationship between remittances and economic growth, using annual data from 1970 to 2016. The traditional Granger causality test was also applied to explore the direction of causality between remittances and economic growth. The results revealed that remittances had a negative long-run effect on growth and a positive effect on economic growth in the short-run. The study found no granger causality between economic growth and remittances in Ghana for the period of the study. FDI, which appears to have a relatively stronger appeal to support economic growth in Ghana, must be focused on. Sound economic and political institutions will be needed to ensure that the economy benefits fully from inward remittances by directing them from consumption to savings avenues and investment opportunities.

PurposeThis study examines the effect of foreign direct investment (FDI) on employment and economic growth in Ghana and examines the role of technology in these relationships.Design/methodology/approachThis study applied the autoregressive distributed lag (ARDL) bounds testing approach to cointegration and Granger causality tests to data from 1995 to 2017.FindingsBased on the empirical analysis, the key findings are as follows: FDI does not affect economic growth or employment in Ghana. However, technology moderates the relationship between FDI and economic growth and FDI and employment in the short run. The study also finds that technology exerts a positive effect on economic growth in both short and long run, whereas trade has a significantly negative effect on economic growth in Ghana.Research limitations/implicationsThe greatest constraint that faced the authors is the nonavailability of data,.Practical implicationsThe transfer of technology agreement enshrined in the GIPC Act should be made more robust and unambiguous, to make it a strict requirement for MNEs to be allowed to operate in Ghana. This increases Ghana's gains from FDI inflow.Social implicationsThe GIPC should tighten its monitoring regime so that MNEs do not exceed their expatriate employment quotas. This will ease the burden of unemployment among the youth in Ghana.Originality/valueThis study adds a new dimension to the literature on the impact of FDI on emerging economies by examining the role of technology in the association between FDI and growth, and FDI and employment.

The paper examined public perception of the effects of poverty on economic growth in Ghana. It specifically examined public perception on the relationship between poverty and economic growth in Ghana using a combination of descriptive statistics and Logit Model to analyse the primary data collected. The result revealed that poverty does not lower investment, per capita income was not high enough to reflect Ghana’s resources, it was also discovered that poverty programmes are effective and standard of living were inadequate. The paper further discovered that unemployment rate was not too high in Ghana. Corruption does not pose any threat to poverty and economic growth. There existed low income inequality between the rich and the poor but income was not evenly distributed while inflation does not increased the plight of the poor or deteriorates the living standard of the poor. The result further discovered that government performance was inadequate, lifespan was low, Ghana was able to meet MDGs goal by the end of 2015 but may not be able to sustain the achievement beyond 2015. Above all, poverty decisively slowed down the pace of economic growth in Ghana. The result of the Logit model showed that unemployment, corruption, secondary school enrollment, government policy, life-expectancy and poverty retarded economic growth while investment, aggregate consumption expenditure, pattern of income distribution and inflation, enhanced economic growth in Ghana. The result further revealed that only investment, aggregate consumption expenditure and inflation are the determinants of economic growth in Ghana. The paper concluded that poverty slowed down the pace of economic growth in Ghana. The paper therefore recommends that government should introduce and maintain policies that will permit improved relationships between poverty and other variables except investment, welfare and inflation so that they can positively and significantly contribute to increase economic growth in Ghana.

The relevant nature of tourism has been clearly found in this study. Tourism is recognized as the developmental factor for an economy. The study therefore chose to conduct the effect of tourism on economic development in Ghana. The study sought to analyze the relationship between tourism and infrastructural development in Ghana. It also examined the relationship between crime rate and tourism in Ghana and analyze the trend of tourism and economic growth in Ghana. The study also focused on examining the effect of tourism on the economic growth of Ghana and finally, analyzed the effectiveness of policy on tourism in Ghana. The study adopted quantitative approach through the use of secondary data from 1990 to 2019. Research analysis used for this study was the instrumental variable and correlation. The outcome of the study suggested that infrastructure development of the economy shows a positive relationship with tourism. It was also estimated in the study that when crime is high tourism tends to be low and vice versa. On the part of the estimation, natural resource was the variable used as the instrumental variable. The outcome from controlled variables such as international trade and exchange rate was found to be positively related to economic growth and development in Ghana. Also, instrumental variable estimation showed that tourism had a positive effect on the economic growth of Ghana. The outcome of the study revealed how the sector had reduced the unemployment rate in Ghana through the provision of both direct and indirect job for its people. The sector however is now coupled with challenges such policy issues and COVID 19 as revealed by players in the sector indicates the overreliance on government. Per the outcome of the study, it was recommended that long term policy should be put in place to ensure that successive government follow to prevent the distortion of the progress of the sector. It is recommended that infrastructure development and tourism should be investigated extensively by focusing on the effect of tourism on economic growth in Ghana. Keywords : Tourism, Economic Development DOI: 10.7176/JTHS/60-03 Publication date: March 31 st 2022

This article empirically investigates whether human capital constrains the impact of Foreign Direct Investment (FDI) and remittances on economic growth in Ghana. An economic growth model for Ghana is specified and estimated using Fully Modified Ordinary Least Squares (FMOLS) estimator and employing annual data spanning the period 1965 to 2008. Empirical results indicate that FDI and remittances are key determinants of economic growth in Ghana. Results indicate that human capital enhances the impact of FDI and remittances on economic growth. Although both government expenditure and trade openness are growth-enhancing, government expenditure appears to crowd-out private investment. Empirical results also indicate that domestic inflationary pressures, unstable political environment and volatile global economy exert a negative impact on economic growth in Ghana.

The main objective of this quantitative study is to ascertain the effect of foreign direct investment, real exchange rate, remittances, and import on economic growth in Ghana. Secondary data on gross domestic product, foreign direct investment, real exchange rate, remittances, import, and gross capital formation from 1980 to 2018 were analyzed. The study employed Autoregressive Distributed Lag for the econometrics analysis. The study found that foreign direct investment, real exchange rate, remittances, import, and gross capital formation cointegrates with economic growth. The main findings are that foreign direct investment, real exchange rate, import, and remittances matter from growth perspective. Remittances have a positive and significant effect on economic growth in Ghana both for the short run and the long run. The study also revealed that foreign direct investment, real exchange rate, and imports have a negative and significant effect on the growth process of Ghana’s economy for both the short run and the long run. The study recommends that the Ministry of Finance, Ghana, financial analysts and other policy makers should undertake steps to reduce imports and attract more remittances inflows to attain long-run economic growth. In addition, the economy must concentrate on viable exchange rate policies such as undervaluation of currency to stimulate sustainable economic growth.

African economies count among the fastest-growing economies in the world. In particular, West African economies have grown by an average of 5.7% in 2013 and 6% in 2014, despite the battle with the Ebola virus. Ghana has been at the forefront of this growth with an average economic growth of 8% in the period 2001–2014 (). The challenge faced by African countries, such as Ghana, is to maintain this high economic growth rate in order to finance a number of developmental projects and curb the rampant poverty prevalent in a number of African countries. The sustainability of Ghana’s growth path and the economic policy that ensued necessitates a sound knowledge of the drivers and determinants of its economic growth. This paper contribute to the literature on economic growth in Ghana, as a case study of a fast-growing economy in Africa, by applying the BMA analysis in determining the drivers of the country’s economic growth. To the best of our knowledge, there is no study that identifies the drivers of economic growth in Ghana by using the BMA approach. The BMA technique provides the advantage over single-model techniques by combining and averaging different existing models and theories to determine the driver of economic growth. Yearly data ranging from 1970 to 2012 was collected from the World Bank Development Indicators (WDI 2012) and International Monetary Fund (IMF) statistics. There are 22 variables used in the model estimation, including the GDP per capita as the dependent variable. Explanatory variables are selected by taking into account their likelihood of determining economic growth in Ghana. Moreover, these variables are selected by accounting for the particularities of the Ghanaian economies, such as the existence of the dual economy and its reliance on natural resources for export revenues. Using the 50% threshold, as suggested by , for the selection of relevant variables that drive economic growth in Ghana, the empirical results show that variables such as population density, crop production, inflation rate, labor force, current account balance and population growth are the important drivers of economic growth in Ghana. The paper suggests the following recommendation in the light of these results. Firstly, inflation targeting should remain the anchor of monetary policy in Ghana. Secondly, this paper recommends that the government of Ghana develops policies and strategies that enable the crowding-in of the private sector. Finally, this paper recommends that the government of Ghana promotes crop production in both commercial and subsistence sectors.

Tax revenue is believed to provide developing countries with a stable and predictable fiscal environment to promote growth and to finance their social and physical infrastructural needs. However, the prior empirical results across different countries witness that the relationship between government tax revenue and economic growth can be negative, positive or neutral depending on countries economic exposure and stabilization policy experiences. Thus, this study examined the effect of tax revenue on economic growth of Ethiopia, from 1980 to 2018 by employing Autoregressive Distributed Lag (ARDL) approach. The enquiry also used Vector Error Correction Model (VECM) in order to observe how fast the co-integrated variables convergence in long-run and found expected negative sign. The stationarity properties of the data were detected using ADF and PP test statistics and the result confirms all the variables are stationary at level and first difference evidencing the effectiveness of ARDL model. The ARDL bound test result indicates that there is long run relationship between RGDP and independent variables. The empirical results are indication of long- and short-run positive impacts of government tax revenue on economic growth in Ethiopia. The result suggests that tax revenue exerted a positive and statistically significant effect on economic growth both in the long run and short-run implying that tax revenue enhances economic growth in Ethiopia. Furthermore, government expenditures on education and health as proxy of human capital and rate of inflation variables show a statistically significant and expected effect on real GDP in Ethiopia. Hence, the policy maker needs to give more effort to expand the tax base and should increase the efficiency of collection to stimulate overall economic growth in long and short run. JEL code: H2; O4; C22

The main objective of this paper is to examine the relationship between tax revenue and economic growth in Nepal. The 43 years' annual time series data from 1974/75 to 2016/17 of GDP, tax revenue and nontax revenue have been used to test the causal relationship of the variables. A unit root test, Engle-Granger’s co-integration and Error Correction Model have been applied for the data analysis. The variables have been found stationary after first differencing I(1) when Augmented Dickey-Fuller unit root test is employed. From Engel-Granger test, it has been found that the variables are co-integrated. The short-term coefficients are not significant, however error correction term (ECT) is significant and contains a negative sign in the error correction model (ECM). It validates the ECM model. The ECT has shown that the annual speed of adjustment from disequilibrium to equilibrium is 34.3 percent. So far as the relationship is concerned, there is a long run relationship between tax revenue and economic growth in Nepal controlling the non-tax revenue. The impact of tax revenue on economic growth could be a good impetus for the policy maker and planner to increase the collection of revenue for the country.

Research background: The research is based on the assumption that the sectoral structure of economy has a significant impact on the level and dynamics of sub-federal budget tax revenues. It distinguishes the following sectoral determinants of tax revenues in regions: the levels of tax return and tax absorption, inflation and economic growth in various economic activities.
 Purpose of the article: We aimed at assessment of contribution of economic activities and their determinants to the increase in tax revenues of sub-federal budgets of the Russian Federation in 2011?2015 compared to 2006?2010.
 Methods: Development of a four-factor additive-multiplicative model of the tax revenue formation in regions, application of the proportional and logarithm methods of factor analysis to assessment of contribution of various activities and their determinants to increase in tax revenues of sub-federal budgets, evaluation of inter-regional inequality of tax revenues growth based on the weighted coefficient of variation, and decomposition of this inequality using the A. Shorrocks technique.
 Findings & Value added: We identified activities that made the largest contribution to the increase in tax revenues of the Russian sub-federal budgets. We found that the inflation factor had a predominant positive effect on the growth of tax revenues, while the contribution of the economic growth factor was 4 times less; however, the situation in various activities differed significantly. Generally, changes of sectoral levels of tax return and tax absorption influenced negatively the regional tax revenues. In addition, they moved in opposite direction in the regions. Ultimately, the uneven change in tax returns and price levels in the mining and manufacturing activities of Russian regions made the greatest contribution to inter-regional inequality of the growth of sub-federal budgets tax revenues.

Energy consumption and economic growth: Evidence from 11 Sub-Sahara African countries

PurposeThis study investigates the link between economic growth, environmental sustainability and deforestation in Ghana, aiming to identify the economic drivers of deforestation and assess how sustainable economic practices can mitigate its rates.Design/methodology/approachThe study used secondary data from 1980 to 2023. It applied quantitative techniques, including regression, vector error correction model and multiple Granger causality to examine the impact of GDP growth, adjusted net savings (ANS) and other control variables on Ghana’s deforestation rate.FindingsThe analysis supports environmental Kuznets curve (EKC) hypothesis, indicating that deforestation initially rises with GDP but declines at higher levels. It finds a long-term relationship where economic growth correlates with reduced deforestation. ANS promotes sustainable growth, while FDI increases deforestation.Research limitations/implicationsThe study supports the EKC hypothesis, indicating that economic growth initially increases deforestation but that ANS positively impacts long-term GDP growth. It emphasizes directing FDI toward sustainable sectors to mitigate deforestation. Overall, integrating environmental sustainability into economic planning is crucial for Ghana’s growth.Practical implicationsTo support sustainable economic development in Ghana, policies should integrate environmental sustainability into growth strategies and standardize adjusted net savings as a metric for evaluating resource-intensive projects. Directing FDI toward sustainable industries, along with stabilizing inflation, can help mitigate deforestation while promoting eco-friendly practices.Originality/valueThis study’s originality lies in analyzing Ghana’s forestry and economic growth through the EKC framework and adjusted net savings from 1980 to 2023. Unlike prior research, this paper addresses overlooked interactions between growth, environmental sustainability, population growth and FDI using more recent, stable data relevant to current policy decisions.