The Effect of Interest Rate Spread on Economic Growth: Ghana’s Perspective

Abstract

The purpose of the study was to investigate the effect of interest rate spread on economic growth using annual time series data from 1975 to 2018. The study used the Engel-granger two-step procedure which uses the OLS technique to establish both the long-run and short-run relationships between interest rate spread and economic growth. The study established that interest rate spread is a statistically important determinant of economic growth but it has a negative impact in the long-run. Also, the result shows that labour force, capital stock, and exports affect economic growth in Ghana positively both in the long-run and short-run. However, government expenditure appeared not to be a statistically significant factor in determining economic growth in Ghana. Policy actions that ensure macroeconomic stability should be embarked upon to achieve stability and sustainable growth of the economy. Export promotion, investment opportunities as well as producing active labour force should be given a priority.