Abstract

Government’s desire to raise economic growth in Ghana has led to a sharp rise in public spending in Ghana without any significant impact on economic growth. This study set out to investigate the relationship between economic growth and government spending at the disaggregated level with an Auto Regressive Distributed Lag (ARDL) model with annual data spanning from 1970 to 2010 to advice policy makers on the dynamics of growth. The study reveals that, in both the long run and short run, government capital expenditure has a significant negative impact on economic growth but recurrent expenditure has a positive effect on economic growth in both the long run and the short run though it was not significant in the short run. The study therefore advocates for fiscal discipline and efficiency in the disbursement of capital expenditure to trigger positive benefits in the future.

Key words: Economic growth, government expenditure, capital expenditure and recurrent expenditure.