Does importation of Goods and Services affect Gross Domestic Savings in Ghana?

Abstract

The importation of goods and services is a common phenomenon in Ghana, which has over the years gained a steady significance in international trade. However, the economic implications of the import of goods and services in Ghana have not been exhaustively investigated as most available related studies have concentrated on its impact on Gross Domestic Product (GDP) rather than the Gross Domestic Savings (GDS). The study therefore investigated the interconnection between the Imports of Goods and Services (IGS) and GDS in Ghana based on annual time series data obtained from the World Bank Development Indicators and World Bank Commodity Price Database (2020) from 1970 to 2019. The theoretical framework was based on the life cycle, relative income, and permanent income hypotheses. A confirmation of a long-run association among the variables was indicated by the error correction term, which was both negative and significant. The ARDL bounds test for cointegration was used to examine both the long-run and short-run linkages between the independent variables and the GDS. The study's observational findings showed that, over the long term, the importation of Goods and Services (IGS) was negatively associated with GDS. Industry Value Added (IVA) recorded a statistically positive relationship with GDS, whereas Crude Oil Price (COP), and Manufacturing Value Added (MVA) recorded statistically negative relationship with GDS. MVA had a statistically significant short-term impact on GDS, but IVA had a substantially negative short-term impact on GDS. A unidirectional causality was discovered from IGS to GDS.