The effect of government expenditure and free maternal health care policy (FMHC) on household consumption in Ghana

In Covid-19 pandemic era when most households’ members have lost their jobs and incomes, the government assistance and programs in ensuring consumption smoothing is imperative. The main objectives of this study are to analyze the impact of government expenditure and free maternal healthcare policy on household consumption expenditure in Ghana using the ARDL estimation technique and historical data from 1967 to 2018. The results revealed that government expenditure and free maternal healthcare policy had a negative and statistically significant effect of on household consumption expenditure in Ghana in both long run and short run. The result suggests that government expenditure and free maternal healthcare policy crowed-out private consumption in Ghana. In addition, the marginal propensity to consume in the long run is 0.690 while the marginal propensity to consume in the short run is 0.214 suggesting that real income have much higher effect on household consumption in the long run than in the short run. The study suggests the need to increase public spending on basic social amenities and also extend the free maternal healthcare policy to all pregnant women especially those in the rural areas of Ghana as these have a greater impact on household consumption in Ghana. The findings from the study have important implications for household savings and interest rate in Ghana.