Title: The nexus between output fluctuations and fiscal deficits: empirical evidence on Ghana

Authors: Rosemond Mahu Augustt; George Adu; Prince Boakye Frimpong

Addresses: Department of Economics, Kwame Nkrumah University of Science and Technology, Kumasi, Ghana ' Department of Economics, Kwame Nkrumah University of Science and Technology, Kumasi, Ghana ' School of Business, Garden City University College, Kenyasi-Kumasi, Ghana

Abstract: Ghana is presently confronted with persistent budget deficits and burgeoning public debt in excess of 52% of GDP and frequent fluctuations in total output below its long-run trend. This is of great concern which has issues for the country's long term growth and debt sustainability. Though the persistent deficit is a common knowledge, the driving force behind the deficit has remained quite elusive. The paper sets out to find the causal relationship between the recurrent budget deficit and output fluctuations in Ghana. With cyclical component of annual real GDP and fiscal deficit to GDP ratio time series data from 1960-2012, and subject to various econometric techniques and three estimation methods (OLS, SUR and VAR), the paper finds a bi-directional causal relationship between fluctuations in output and fiscal deficits to GDP ratio.

Keywords: output fluctuations; fiscal deficits; Ghana; budget deficits; public debt; long term growth; debt sustainability; econometrics.

DOI: 10.1504/IJSE.2015.068676

International Journal of Sustainable Economy, 2015 Vol.7 No.2, pp.100 - 117

Received: 05 Aug 2014
Accepted: 18 Sep 2014

Published online: 30 Mar 2015 *

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