Ghana experienced its first half-century as an independent nation in March 2007. However, the early promise of democracy combined with economic and social development that hailed the new era in 1957 led to disappointments in the first three decades of independence. While democracy has now been restored, with the peaceful transfer of one civilian administration to another in 2001, and while there has been some recovery from the earlier economic collapse, the challenge of economic and social transformation looms large.

Indeed, the last two decades have seen steady and significant economic growth in spite of considerable instability in macroeconomic performance...

President Clinton famously had the slogan, ‘It’s the economy, stupid’, hanging in the Oval Office as a constant reminder to himself of what his priority should be in order to keep the American electorate on his side. Giving priority to the population’s economic well-being is good advice to all democratic politicians, but I shall argue that, if we want to understand the half-century of the Ghanaian economy’s experiences, we should invert Clinton’s priority and pay most attention to institutions and politics. The mantra for economists trying to understand the performance of Ghana’s economy should be, ‘It’s the polity . ....

When Ghana became the first African nation to achieve independence from colonial rule on 6 March 1957, there was much jubilation and hope that it would pioneer the way toward rapid growth and development for Africa as a continent. Indeed, Ghana experienced reasonably high growth soon thereafter, but by 1965 per capita growth was already negative, and when the coup d’état overthrew the Nkrumah regime in February 1966, per capita income was below its value at the time of independence. Conditions appeared to improve significantly during the late 1960s and early 1970s. However, the mid-1970s saw the beginning of significant...

Over the decade of the 1990s Ghana was considered an example among African countries regarding the pace and extent of the economic reforms affecting its trade regime, its financial sector, and the conduct of its fiscal and monetary policy (Kapur et al., 1991). This reputation was earned in the latter half of the 1980s when the government instituted a series of policy measures to rescue the economy from the depths of its most severe crisis in the post-colonial period. The Economic Recovery Programme (ERP) placed Ghana on a path of modest economic growth: from a per capita GDP of $309...

This study explores the determinants of per person real output growth, exchange-rate volatility, and price inflation — and their interactions and implications for economic development — as well as the roles of money and interest rates in price and output determination in Ghana. The interrelated problems of inflation, exchange-rate instabilities and unstable output (or economic) growth afflict many countries. In the less developed countries (LDCs), high inflation is induced in part by excessive moneysupply growth often resulting from easy fiscal policy, with uncertain effects on real output growth. Inflation is a problem because, ceteris paribus, it lowers real incomes, discourages savings, makes...

Since the breakdown of the Bretton Woods Accord in 1973, and the advent of floating exchange rates, there has been renewed interest in the effect of devaluation on the trade balance of both developed and developing countries. Developing countries facing balance-of-payments problems due to expansionary financial policies, a deterioration in the terms of trade, price distortions, higher debt servicing or a combination of these factors, have often resorted to devaluing their currencies (Nashashibi, 1983). The aim of such a policy is to promote export-oriented growth by liberalizing their markets. As pointed out by Katseli (1983), ‘it is by now well...

After two decades of macroeconomic stabilization policies, Ghana still has a low GDP per capita and is highly dependent on commodity exports. Specifically, it is one of the countries with the lowest proportion of exporting manufacturing firms in sub-Saharan Africa. To change this situation, a shift towards non-traditional exports with higher demand growth and less price volatility is a precondition. However, the declining terms of trade and external shocks have an impact on macroeconomic variables such as exchange and interest rates and therefore reduce the prospects for investment and growth (UNCTAD, 2004). Therefore at the macro level export and investment...

Savings, a necessary engine of economic growth, have been very low in Ghana. Gross Domestic Savings as a percentage of GDP in Ghana have been low compared with many other African countries, averaging, between 1980 and 2001, 6.4% in Ghana, 37.4% in Botswana, 21.4% in Cameroon, 21.6% in Nigeria, 13.9% in Kenya and 7.3% in Malawi (World Bank, 2003). The apparent low saving rate in Ghana has been due to a combination of micro and macroeconomic and political factors. In order to overcome the problem of low savings in Ghana, various monetary and fiscal policies have been pursued over the...

Financial systems tend to evolve around a banking sector seeking to achieve economies of scale in order to offset the costs of collecting and processing information designed to reduce uncertainty, thereby facilitating a more efficient allocation of financial resources. However, a competitive banking system is required to ensure that banks are effective forces for financial intermediation, channelling savings into investment fostering higher economic growth.

This paper assesses the level of competition in the Ghanaian banking sector. At first sight, the very high profit ratios and high cost structure of Ghanaian banks could indicate a monopolistic banking structure. This is partly...

This study assesses how the policy, legal and regulatory framework has affected, and been influenced by, the development of rural and microfinance institutions¹ (RMFIs) in Ghana, especially in terms of the range of institutions and products available, and their financial performance and outreach. The potential of microfinance to reach large numbers of the poor is well understood (Robinson, 2001). Questions for regulation are the extent to which a flexible regulatory environment can encourage innovation and a diversity of RMFIs and products serving different market niches not reached by commercial banks, and at what point special legislation may be needed, whether...

This study documents the construction of a poverty map based on data from the fourth round Ghana Living Standards Survey (GLSS 4) and the Housing and Population Census 2000. Based on a recently developed methodology, it permits the calculation of poverty indicators at very low levels of aggregation, using the detailed information found in the survey and the exhaustive coverage of the census. Results at district level as well as at the town and area council level are presented and analyzed.

In the past decade poverty profiles have been developed into useful tools for characterizing, assessing and monitoring poverty. Based...

A critical instrument available to government in the pursuit of the poverty reduction objective is fiscal policy — budgetary allocation and disbursement of budgetary resources. In recent times, the Government of Ghana adopted the Ghana Poverty Reduction Strategy (GPRS), which serves as the overall framework document for medium to long-term development policy in Ghana. Budget and macroeconomic policies are therefore to be derived from the GPRS. The GPRS is broadly speaking one of the poverty reduction strategy papers demanded by the IMF and the World Bank, which describe the country’s macroeconomic, structural and social policies and programmes over a three year...

One of the defining characteristics of the Ghanaian macroeconomy over the past 40 years has been its high, and often variable, rates of inflation. Inflation was particularly high and variable in the politically turbulent 1970s and early 1980s, but has persisted throughout the gradual economic recovery since 1983. Though it has been lower and less variable in the latter period, it still remains high in absolute terms and by comparison with many other countries.

High and variable inflation is typically seen as a symptom or indicator of macroeconomic instability. But it is also argued that macroeconomic instability in general, and...

Poverty, as a reflection of material, social or rights deprivation, is of concern in its own right, hence its reduction has been the focus of economic policy in both developed and developing countries. However, as pointed out by Gibson (2001), people may, in a given time period, be poor either because their mean quantitative proxy indicator for poverty, such as income, consumption expenditure or calories, falls below the national average (or poverty line) or because they have suffered a temporary shortfall in consumption or income. In other words, households or persons may be poor at a point in time either...

Decentralization has been considered by many as one of the most important strategies on the agenda of public sector reform. This is because donors and governments in sub-Saharan Africa have considered decentralization as a strategy that will bring service delivery closer to consumers, improve the responsiveness of the central government to public demands and thereby reduce poverty, improve the efficiency and quality of public services and empower lower units to feel more involved and in control. In this connection, decentralization is linked to the concept of subsidiarity, that is, making decisions at the lowest feasible level. It is also meant...

This study uses panel data from school districts and a new panel data frontier estimator to investigate the effects of family inputs on technical efficiency in the production of secondary education in Ghana. It does this by estimating a translog stochastic frontier production function for education, calculating technical inefficiencies from the production function and using family inputs as correlates of the calculated technical inefficiency. It measures educational output as the proportion of students in a district passing the West African Examination Council’s (WAEC) certification examination and estimates technical inefficiencies for two levels of education — Junior and Senior Secondary Schools — focusing...

One of the strongest and most consistent findings in development, health and labour economics is the positive relationship between schooling and child health. This empirical relationship has been confirmed in numerous studies across different time periods, countries and measures of child health.¹ These studies generally treat education as a ‘black box’, however. What is measured is not what a person has learned in terms of skills, such as, for example, literacy and numeracy but rather what level or grade has been completed. Two main issues are involved here. First, the link between schooling and child health really goes from schooling...

Because of the relationship that exists between health, productivity and equitable development, health improvements form a key element of development. Since independence in 1957, the government of Ghana has implemented a number of policies aimed at improving the health status of its people. Its seven-year and five-year development plans in the early days of independence, as well as economic policies in recent decades, contain various measures to reduce the economic burden of disease, with a particular focus on morbidity, mortality and malnutrition among children. Indeed, the economic reforms and structural adjustment programmes that have been pursued since 1983 have gradually...