Government Stability in the Remittance-Economic Growth Link in Ghana

Abstract

Several studies have revealed that many factors affect economic growth. Remittances and government stability have been identified as two of these factors. Over the years, remittances have become a major source of financial inflows, especially in Ghana. This study examines the role of government stability in the remittance-economic growth relationship in Ghana. Annual time series data from 1984 to 2020 was extracted from the World Development Indicators (WDI) and the International Country Risk Guide (ICRG). An ARDL model with a level structural break was estimated. The results show, first, that a cointegration relationship exists among the variables in the presence of structural breaks. Secondly, remittances and government stability have a significant, positive long-run impact on economic growth, while no significant impact of GDPPC and government stability on remittances was found. Thirdly, in the short run, remittances and government stability are not significantly associated with growth. The role of remittances in the economic growth of Ghana is important. When remittances increase, economic growth will likewise increase. Government policy-making should create an enabling environment to channel remittances into productive uses, including entrepreneurial ventures. Remittances must be received through proper channels for easy accountability, and government stability should be complemented by good governance to further foster economic growth.