The Impact Of Natural Resource Dependence On Economic Growth:Case Of Ghana

This research investigated the relationship between natural resource dependence and gross domestic product growth (economic growth) employing a simple time series econometric techniques. All regresson were run in Eviews. Our test for unit roots and cointegration show that there is a long-run equilibrium relationhip at which the series become stationary. We used mineral rent percentage of gross domestic product as a proxy for natural resource dependence which proved to be statistically significant and directly related with economic growth in two out three regressions. Broad money (proxy for financial development) consistently show negative and significant coefficient in two out three regressions and inversely related with economic growth. Except for broad money which shows negative coefficients, the other variables show positive coefficients and statistically significant in all models estimated. We argue that the resource curse which stem from the negative impact of natural resource abundance/dependence on economic growth cannot be applied on Ghana at least for the period covered in this research. Positive correlation between trade and mineral rent refutes the Dutch disease hypothesis. We advised that monetary policies should be augmented with policies which enhance productivity and encourage exports as well as import substitution to avert the negative effect of broad money on gross domestic product growth. We also advocate for strong and quality institutions like proactive legal system and property rights that will clearly spell out jurisdictions of ownership and engagement in natural resource endowed localities so as to bid in the bud any prospects of lootability and civil unrest thereby enhancing living standard through peaceful development. We also encourage strong and matured financial system and proper coordination between natural resource wealth and monetary policies in an effort to check against currency appreciation that could adversely affect the tradable sector and hence slow growth.