Macroeconomic determinants of interest rate spreads in Ghana

Purpose: The purpose of this paper is to examine macroeconomic determinants of interest rate spreads in Ghana for the period 1980-2013. Design/methodology/approach: The autoregressive distributed lag bounds test approach to cointegration and the error correction model were used for the estimation. Findings: The results indicate that exchange rate volatility, fiscal deficit, economic growth, and public sector borrowing from commercial banks, increase interest rate spreads in Ghana in both the long and short run. Institutional quality reduces interest rate spreads in the long run while lending interest rate volatility and monetary policy rate reduce interest rate spreads in the short run. Research limitations/implications: The depreciation of the Ghana cedi must be controlled since its volatility increases spreads. There is a need for fiscal discipline since fiscal deficits increase interest rate spreads. Government must reduce its domestic borrowing because the associated crowding-out effect increases interest rate spreads. The central bank must improve its monitoring and regulation of the financial sector in order to reduce spreads. Originality/value: The main novelty of the paper (compared to other studies on Ghana) lies on the one hand; analysing macroeconomic determinants of interest rate spreads and, on the other hand, controlling for the impact of institutional quality on interest rate spreads in Ghana

Explaining the Growth of Government Spending in Ghana

Government spending is a reflection of government policy choices. However, the implications of government spending growth necessitate an understanding of the drivers of the growth of government spending. The present paper modifies the median voter model to explain the growth of government spending by introducing foreign aid, public debt, and democracy. The paper argues that these variables are important drivers of government spending for developing countries, hence a model explaining the growth of government spending of these group of countries that ignores the potential impact of foreign aid, public debt and democracy does not capture fully what determines the growth of government spending. Such a model is too simplistic and less relevant for policy purposes. The paper therefore makes use of annual time series data to determine the long-and short-run impact of per capita income, tax share, minimum wage, population growth, foreign aid, public debt and democracy on the growth of government spending in Ghana over the period 1980-2012. The autoregressive distributed lag (ARDT) bounds test for cointegration and the error correction model (ECM) procedures were used for the estimation. Additionally, the paper provides results of generalized forecast error variance decomposition in order to determine the effect of innovations in both the dependent and independent variables on the dependent variable. The findings reveal that per capita income, tax share, population growth, minimum wage, foreign aid, public debt, and democracy are key determinants of the growth of government spending in the long-run. With the exception of minimum wage, these variables are also key determinants of the growth of government spending in the short-run. Variance decomposition results suggest innovations in per capita income and population growth generally account for the largest variations in government spending over the horizon considered. Also, innovations in foreign aid, public debt, and democracy are responsible for significant variations in government spending. The findings and policy recommendations of the paper provide vital information for policy implementation in Ghana

An empirical analysis of the relationship between minimum wage, investment and economic growth in Ghana

Abstract The paper determines whether minimum wage stimulates economic growth in Ghana, for the period 1984-2013, using autoregressive distributed lag (ARDL) bounds testing approach to cointegration, within an error correction framework. A preliminary test provides evidence of correlation between minimum wage and investment, thereby allowing for an examination of the wage-growth relationship. Four equations are used to determine the relationship between minimum wage and economic growth. The results from the simple regression of minimum wage on economic growth indicate a positive and statistically significant impact of minimum wage on economic growth both in the long-and short-run. However, the results from other estimations of the wage-growth relationship when investment, credit to the private sector and an interaction term of wage and investment are controlled for precludes any naïve policy formulation which may be solely based on the positive wage-growth relationship obtained. Specifically, the results from the other estimations imply minimum wage can only be growth enhancing if it is met by simultaneous increases in investment spending, as well as deliberate and sustained policies aimed at ensuring credit to finance private investment are readily available, easily accessible, and affordable. In addition, the ratio of public investment to tax revenue must increase as minimum wage increases since such complementary changes are more likely to lead to economic growth

An empirical analysis of the relationship between minimum wage, investment and economic growth in Ghana

Abstract The paper determines whether minimum wage stimulates economic growth in Ghana, for the period 1984-2013, using autoregressive distributed lag (ARDL) bounds testing approach to cointegration, within an error correction framework. A preliminary test provides evidence of correlation between minimum wage and investment, thereby allowing for an examination of the wage-growth relationship. Four equations are used to determine the relationship between minimum wage and economic growth. The results from the simple regression of minimum wage on economic growth indicate a positive and statistically significant impact of minimum wage on economic growth both in the long-and short-run. However, the results from other estimations of the wage-growth relationship when investment, credit to the private sector and an interaction term of wage and investment are controlled for precludes any naïve policy formulation which may be solely based on the positive wage-growth relationship obtained. Specifically, the results from the other estimations imply minimum wage can only be growth enhancing if it is met by simultaneous increases in investment spending, as well as deliberate and sustained policies aimed at ensuring credit to finance private investment are readily available, easily accessible, and affordable. In addition, the ratio of public investment to tax revenue must increase as minimum wage increases since such complementary changes are more likely to lead to economic growth

Inflation Targeting Framework and Interest Rates Transmission in Ghana: An Empirical Investigation

This paper investigates the long-and short-run rate of transmission of the prime rate to interest rates since the implementation of inflation targeting policy in Ghana. Monthly data covering the period January 2002 to March 2016 is used. The Johansen and Hansen parameter instability cointegration, the FMOLS and DOLS estimation procedures were used. The long-run results show incomplete pass-through of the prime rate to commercial banks’ lending and deposit rates but over pass-through to the 91-day Treasury bill rate. The short-run adjustment shows relatively slow transmission of the prime rate to the respective interest rates. Given the findings, relevant policy suggestions are provided

Clinical and laboratory characteristics of children with sickle cell disease on hydroxyurea treated with artemether-lumefantrine for acute uncomplicated malaria

IntroductionLimited information exists on any interactions between hydroxyurea (HU) and antimalarials in sickle cell disease (SCD). We evaluated changes in clinical and laboratory parameters among children with SCD on HU therapy treated with artemether-lumefantrine (AL) for acute uncomplicated malaria (UM).MethodsA prospective, non-randomized, pilot study of 127 children with SCD (23, UM; 104, steady state) were recruited from three hospitals in Accra. UM participants were treated with standard doses of AL and followed up, on days 1, 2, 3, 7, 14, and 28. Venous blood was collected at baseline and follow-up days in participants with UM for determination of malaria parasitaemia, full blood count, reticulocytes, and clinical chemistry. Further, Plasmodium falciparum identification of rapid diagnostic test (RDT) positive samples was done using nested polymerase chain reaction (PCR).ResultsAmong SCD participants with UM, admission temperature, neutrophils, alanine-aminotransferase, gamma-glutamyl-transferase, and haemoglobin significantly differed between HU recipients (HU+) and steady state, while white blood cell, neutrophils, reticulocytes, bilirubin, urea, and temperature differed significantly between non-HU recipients (no-HU), and steady state. Mean parasitaemia (HU+, 2930.3 vs. no-HU, 1,060, p = 0.74) and adverse events (HU+, 13.9% vs. no-HU, 14.3%), were comparable (p = 0.94). Day 28 reticulocyte count was higher in the HU+ (0.24) (0.17 to 0.37) vs. no-HU, [0.15 (0.09 to 0.27), p = 0.022]. Significant differences in lymphocyte [HU+ 2.74 95% CI (−5.38 to 58.57) vs. no-HU −0.34 (−3.19 to 4.44), p = 0.024]; bilirubin [HU+, −4.44 (−16.36 to 20.74) vs. no-HU −18.37 (−108.79 to −7.16)]; and alanine aminotransferase, [HU+, −4.00 (−48.55 to 6.00) vs. no-HU, 7.00 (−22.00 to 22.00)] were observed during follow up.ConclusionParasite clearance and adverse event occurrence were comparable between SCD children treated with AL irrespective of HU status. However, distinct patterns of changes in laboratory indices suggest the need for larger, more focused studies

Democracy, Globalization and Private Investment in Ghana

The article examines the effects of democracy and globalization on private investment in Ghana for the period 1980–2012, using the autoregressive distributed lag (ARDL) bounds test for cointegration and the error correction model (ECM). Two models are used. In Model 1, democracy is proxy by an index for institutional quality (Polity 2), while Model 2 uses an index for civil liberties as proxy for democracy. The results for Model 1 show globalization and public investment increase private investment, while exchange rate volatility and trade openness decrease private investment in both the long and short run. In addition, national income and interest rate reduce private investment in the short run. In the case of Model 2, credit to the private sector and public investment increase private investment, while exchange rate volatility and trade openness decrease private investment in both the long and short run. Finally, national income and interest rate reduce private investment in the short run. The findings and policy recommendations of the article provide vital information for policy implementation in Ghana

An Empirical Analysis of the Relationship between Minimum Wage, Investment and Economic Growth in Ghana

The paper determines whether minimum wage stimulates economic growth in Ghana, for the period 1984-2013, using autoregressive distributed lag (ARDL) bounds testing approach to cointegration, within an error correction framework. A preliminary test provides evidence of correlation between minimum wage and investment, thereby allowing for an examination of the wage-growth relationship. Four equations are used to determine the relationship between minimum wage and economic growth. The results from the simple regression of minimum wage on economic growth indicate a positive and statistically significant impact of minimum wage on economic growth both in the long-and short-run. However, the results from other estimations of the wage-growth relationship when investment, credit to the private sector and an interaction term of wage and investment are controlled for precludes any naïve policy formulation which may be solely based on the positive wage-growth relationship obtained. Specifically, the results from the other estimations imply minimum wage can only be growth enhancing if it is met by simultaneous increases in investment spending, as well as deliberate and sustained policies aimed at ensuring credit to finance private investment are readily available, easily accessible, and affordable. In addition, the ratio of public investment to tax revenue must increase as minimum wage increases since such complementary changes are more likely to lead to economic growth