Assessing the Effects of Macroeconomic Variables on Economic Welfare in Ghana

Abstract

This study employs the Auto-Regressive Distributed Lag (ARDL) bounds approach to investigate the relationship between Real GDP, which serves as an estimator of a nation’s economic performance, and selected macroeconomic variables. Using data from the World Bank Development Indicators spanning the period from 1993 to 2022, our analysis reveals distinct patterns in the interplay between inflation, labour productivity, public consumption expenditure, and real GDP. The results highlight the negative impact of inflation on economic well-being. Conversely, a positive correlation emerges between real GDP and both labour productivity and public consumption expenditure. These findings contribute nuanced insights to the ongoing discourse on the appropriateness of Real GDP. The observed negative influence of inflation on Real GDP underscores the importance of vigilant inflation management for sustained economic stability. On the other hand, the positive association between real GDP and labour productivity, as well as public consumption expenditure, implies potential avenues for fostering economic growth and prosperity. These findings not only enhance our understanding of the dynamic interactions within economic systems, but also challenge conventional perspectives on real GDP as an indicator of economic health. These insights provide valuable considerations for crafting effective policies that go beyond GDP figures to ensure holistic and sustainable national economic well-being.