Macroeconomic adjustments, economic growth and the balance of payments in Ghana, 1983‐88

Abstract

This paper seeks to investigate the manner in which, and the extent to which, Ghana adjusted to its economic imbalances in the 1983–88 period. The analysis involves a decomposition of the adjustment process into absorption reduction, switching and growth of traded goods output. The results show that successful adjustment to the external imbalance was achieved not so much by absorption reduction but by the expansion of traded goods output and switch of domestic expenditure in favour of non‐tradeable goods and services. The expansion of traded goods output was also the major source of increased domestic output and income during the period. Despite the considerable progress made, the growth of the economy is yet to become self‐sustaining based on the strength of domestic savings and private investment.