Trade openness, foreign aid and economic growth in post-liberalisation Ghana: An application of ARDL bounds test

Abstract

The extent to which trade openness and foreign aid impacts on economic growth, has for years been an issue of global debate. Being one of the forerunners to adopt liberalisation policies in sub-Saharan Africa, Ghana’s post-liberalisation economic growth performance has received commendations from international institutions. This has increased government commitment in recent years to open the economy to international competition. Moreover, foreign aid inflow over the period has been relatively large. This paper employs the ARDL bounds testing approach to cointegration, to investigate the extent to which trade openness and the inflow of foreign aid, impact on economic growth in post-liberalisation Ghana. The paper finds that this effect is positive and statistically significant in both the short-run and the long run, although reduced by their interaction. Key words: Trade openness, foreign aid, economic growth, Ghana, ARDL.