External Debt & Industrialization: The Case of Ghana

Abstract

The effects of external debt have traditionally been assessed in broad economic terms, often through metrics like the debt-to-GDP ratio, rather than examining its specific impacts across different sectors of the economy. The study aims to shift from this perspective by focusing on the impact of external debt on industrialization, particularly in developing countries where industrial growth is frequently seen as a catalyst for economic advancement. Using Ghana as a case study, the analysis focuses on both the short-term and long-term effects of external debt on industrialization from 1985 to 2022, employing the Autoregressive Distributed Lag (ARDL) Model. The findings reveal that external debt has a positive impact on industrialization in the short run however this effect is negative and statistically significant in the long run.