The effect of international trade on economic growth: Evidence from Ghana

Abstract

International trade has been paramount to every country, especially developing economies, as it enables them to access goods and services they cannot produce. The Ghanaian economy has been highly dependent on imports over the years. This study examined the effects of foreign trade (export and import) on economic growth using data from the World Bank from 1990 to 2020. To ensure the accuracy of the results, econometric methods including a unit root test, the Johansen cointegration test, the vector error correction model and the Granger causality test, were employed. The ADF and Kwiatkowski-Phillips-Schmidt-Shin unit root tests showed that the variables were non-stationary at the level and integrated at the first-order difference. The study finds exports and imports to support Ghana's economic advancement. This study recommends the government to supports and encourage domestic firms to produce on a large scale for domestic consumption and exports.

Keywords: Economic growth, exports, GDP, imports, VECM;