n African Journal of Business and Economic Research - Cointegration and causality analysis of Ghanaian exports, foreign, domestic and human capital

Volume 1, Issue 1
  • ISSN : 1750-4554
  • E-ISSN: 1750-4562


Endogenous growth theory holds that outward oriented trade policies promote growth and better performance of economies in the medium and longterm. The theory however, emphasizes that the fundamental factors that enhance long-term growth are human resources, physical infrastructure, macroeconomic stability, the rule of law and the role of intangible inputs such as knowledge acquisition. To investigate whether available data suggest cointegration and causality among physical capital, human capital and exports in Ghana, a production function is postulated for exports. Multivariate cointegration and causality analyses were performed on variables included in the model using the Johansen (1988, 1991, and 1992) approach. The evidence suggests the variables are cointegrated with four cointegration vectors. It further suggests the existence of only one-directional causality running from exports to domestic savings. Evidence also points to significant short-run deviations. The policy implication is that to increase domestic savings, exports must increase.

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