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.

No abstract

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 shortrun 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 (ARDL) 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.JEL Classifications: C22, F35, H50, H60

The 1990s and 2000s were a period of 'hyper-globalisation' (Subramanian & Kessler, 2013), marked by particularly rapid rises in international trade and capital flows. 1 According to many observers, this had a number of benefits, not least much faster rates of convergence across the developing world, particularly from the late 1990s onwards (ibid; see also Abiad et al., 2014;Bourguignon, 2015). Nonetheless, the failure to manage some of the downsides of globalisation has, it is argued, contributed to a growing political backlash against globalisation since the early 2000s (e.g., Rodrik, 2018;Stiglitz, 2018). This has in turn threatened to undermine the benefits of globalisation, through a return to trade protectionism and economic nationalism.Changes in the level and composition of government spending are one key way in which governments can manage the process of globalisation. According to the 'compensation hypothesis' (Garrett, 1998;Rodrik, 1998), governments respond to globalisation by increasing spending, either as a way of compensating the adversely affected (e.g., workers in import-competing sectors) or, more generally, as a means of offsetting the volatility and insecurity resulting from greater exposure to global markets. Rodrik (1998) found strong empirical support for this hypothesis, in the form of a robust positive relationship between 1 The 1990s and 2000s have also been referred to as the period of 'high globalisation' (Milanovic 2016) and 'New Globalisation' (Baldwin 2016:79): roughly speaking, the period beginning with the fall of the Berlin Wall and ending with the start of the global financial crisis. Further details on trends in trade and capital flows in this period are provided in Section 5 below.This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.

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