Export Earnings Instability and Investment in Ghana, 1981 to 2011


The study investigates the effect of the instability of export earnings on gross fixed capital formation (total investment) in Ghana over the period, 1981 to 2011, marked by continuous political stability. The analysis employs the autoregressive distributed lag (ARDL) method of cointegration to evaluate a set of factors, which affect investment as measured by the investment to gross domestic product (GDP) ratio. The results of the analysis confirm the expected negative relationship between export earnings instability and investment. Other factors that significantly influence investment in Ghana are real GDP growth, merchandise trade balance, real interest rate and gross domestic savings ratio. Based on the analysis, we recommend policy measures aimed at increasing the domestic savings ratio and export diversification given the re-emergence of reduced real values of Ghanaian export commodities in the world market after the high values of these commodities during the first decade of the 21st century.

Share and Cite:

Aidam, P. and Anaman, K. (2014) Export Earnings Instability and Investment in Ghana, 1981 to 2011. Modern Economy, 5, 625-634. doi: 10.4236/me.2014.55059.

Conflicts of Interest

The authors declare no conflicts of interest.


[1] Anaman, K.A. (2006) Factors That Enabled Successful Economic Reform and Recovery in Ghana from 1983 to 2006. IEA Monograph Number 11, Institute of Economic Affairs, Accra, 40 p.
[2] Anaman, K.A. and Agyei-Sasu, F. (2012) Impact of Democratic Political Transition on the Performance of Business Firms in Ghana. Economic Papers: A Journal of Applied Economics and Policy, 31, 391-400.
[3] Institute of Statistical Social and Economic Research (ISSER) (2013) The State of the Ghanaian Economy in 2012. ISSER, University of Ghana, Accra.
[4] Prebisch, R. (1962) The Economic Development of Latin America and Its Principal Problems. Economic Bulletin for Latin America, 7, 1-22.
[5] Singer, H.W. (1950) U.S. Foreign Investment in Underdeveloped Areas: The Distribution of Gains between Investing and Borrowing Countries. American Economic Review, 40, 473-485.
[6] Moran, C. (1983) Export Fluctuations and Economic Growth. Journal of Development Economics, 12, 195-218.
[7] Fosu, A.K. (1992) Effect of Export Instability on Economic Growth in Africa. The Journal of Developing Areas, 26, 323-332.
[8] Borumand, S., Taghi, M., Bigdeli, Z. and Rezaei, E. (2009) Exports Instability, Capital Accumulation and Economic Growth: The Case of Iran. Quarterly Journal of Quantitative Economics, 6, 21-36.
[9] Chimoba, O.P. (2010) The Estimation of Long Run Relationship between Economic Growth, Investment and Export in Nigeria. International Journal of Business and Management, 5, 215-222.
[10] Kenen, P.B. and Voivodas, C. (1973) Export Instability and Economic Growth. Kylos, 25, 791-801.
[11] Aiello, F. (1999) Financial Stabilization Systems, Economic Growth of Developing Countries and EU’s STABEX. University of Calabria, Italy.
[12] Glezakos, C. (1984) Export Instability and Economic Growth: Reply. Economic Development and Cultural Change, 32, 229-236.
[13] Massell, B.F. (1970) Export Instability and Economic Structure. American Economic Review, 60, 618-630.
[14] Coppock, J. (1960) International Economic Instability. McGraw Hill, New York.
[15] Ocran, M.K. and Biekpe, N. (2008) Primary Commodity Export and Economic Growth in Sub-Saharan Africa: Evidence from Panel Data Analysis. South African Journal of Economic and Management Sciences, 11, 465-474.
[16] Sinha, D. (2007) Effects of the Volatility of Exports in the Philippines and Thailand. The IUP Journal of Financial Economics, 5, 78-83.
[17] Stordel, H. (1990) Export Income Risk and Determinants of Capital Formation in Developing Countries. Weltwirtschaftsliche Archiv, 126, 346-368.
[18] Sinha, D. (1999) Export Instability, Investment and Economic Growth in Asian Countries. Economic Growth Centre, Yale University and Macquarie University, Sydney.
[19] Akpokodje, G. (2000) The Effect of Export Earning Fluctuations on Capital Formation in Nigeria. Nigeria Institute of Social and Economic Research, Ibadan.
[20] Gyimah-Brempong, K. (1991) Export Instability and Economic Growth in Sub-Saharan Africa. Economic Development and Cultural Change, 39, 815-828.
[21] Khan, A.H. and Saqib, N. (1993) Export Expansion and Economic Growth: Further Empirical Evidence. Journal of Development Economics, 18, 1-12.
[22] Krishna, K., Ozyildirim, A. and Swanson, N. (1998) Trade, Investment and Growth: Nexus, Analysis and Prognosis. NBER Working Paper No. 6861.
[23] Levine, R. and Renelt, D. (1992) A Sensitivity Analysis of Cross-Country Growth Regressions. American Economic Review, 82, 942-963.
[24] Bischoff, C.W. (1969) Hypothesis Testing and the Demand for Capital Goods. The Review of Economics and Statistics, 51, 354-368.
[25] Blejer, M.I. and Khan, M.S. (1984) Government Policy and Private Investment in Developing Countries. IMF Staff Papers, 31, 379-403.
[26] Pesaran, H.M., Shin, Y. and Smith, R.J. (2001) Bounds Testing Approaches to the Analysis of Long-Run Relationships. Working Paper No. 9907, University of Cambridge, Cambridge.
[27] Anaman, K.A. and Osei-Amponsah, C. (2007) Analysis of the Causality Links between the Growth of the Construction Industry and the Growth of the Macro-Economy in Ghana. Construction Management and Economics, 25, 951-961.

Copyright © 2023 by authors and Scientific Research Publishing Inc.

Creative Commons License

This work and the related PDF file are licensed under a Creative Commons Attribution 4.0 International License.