An Empirical Study of Economic Growth and Expanding Role of Government in Ghana: 1965-2004

Wagner's law is tested by using traditional versions and our own versions which account for prices. Results show that Wagner's law exists in Ghana. However, there is no empirical support for the view that increases in government expenditures lead to economic growth. Both traditional Granger causality and autoregressive distributed lag estimates of long-run and error correction models show that economic growth Granger-causes changes in government expenditures, not vice versa. This suggests that while the government might facilitate economic growth in Ghana, it cannot serve as an engine of economic growth.