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A time series analysis of mineral revenue and economic

growth in Ghana

Frank Boateng, Gomashie Edem Wisdom & Sulaiman Olusegun Atiku

To cite this article: Frank Boateng, Gomashie Edem Wisdom & Sulaiman Olusegun Atiku (2025)
A time series analysis of mineral revenue and economic growth in Ghana, Cogent Economics &
Finance, 13:1, 2465986, DOI: 10.1080/23322039.2025.2465986

To link to this article: https://doi.org/10.1080/23322039.2025.2465986

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COGENT ECONOMICS & FINANCE
2025, VOL. 13, NO. 1, 2465986
https://doi.org/10.1080/23322039.2025.2465986

GENERAL & APPLIED ECONOMICS | RESEARCH ARTICLE

A time series analysis of mineral revenue and economic growth

in Ghana
Frank Boatenga , Gomashie Edem Wisdomb and Sulaiman Olusegun Atikuc,d
a
Department of Management Studies, University of Mines and Technology, Tarkwa, Ghana; bMinerals Commission,
University of Mines and Technology, Tarkwa, Ghana; cDepartment of Economic and Business Sciences, Walter Sisulu
University, Mthatha, South Africa; dHarold Pupkewitz Graduate School of Business, Namibia University of Science and
Technology, Windhoek, Namibia

ABSTRACT ARTICLE HISTORY

Mineral revenue is a vital source of revenue for the Government of Ghana, making it Received 22 August 2024
essential to assess its impact on economic growth. This study examines the long-term Revised 27 December 2024
relationship between mineral revenue, government expenditure (GE), foreign direct Accepted 7 February 2025
investment (FDI), and economic growth in Ghana from 1990 to 2019. Utilising a quan-
KEYWORDS
titative approach, data was sourced from the Minerals Commission, the Bank of Economic growth; foreign
Ghana, the Ghana Chamber of Mines, and World Development Indicators. The study direct investment;
employed techniques such as the Vector Error Correction Model, Granger Causality, government expenditure;
variance decomposition, and VAR for time series data analysis. Cointegration results mineral revenue; real gross
indicated at least one cointegrating equation, revealing a long-term economic rela- domestic product
tionship among the variables. The findings suggest that mineral revenue positively
correlates with economic growth (measured as real GDP), while FDI and GE exhibit SUBJECTS
negative relationships with real GDP. Notably, the inverse correlation between GE and Economics; Finance;
Environmental Economics
real GDP implies that public spending may not be effectively directed toward sectors
that significantly enhance economic growth. Overall, the study confirms that mineral
revenue is a key contributor to Ghana’s GDP and highlights that shocks to the mining
industry could have substantial repercussions for the economy.

IMPACT STATEMENT
The study underscores the critical role of mineral revenue as a significant contributor
to Ghana’s economic growth. The analysis of secondary data from 1990 to 2019
reveals a positive long-term relationship between mineral revenue and real GDP, indi-
cating that fluctuations in the mining sector directly impact national economic per-
formance. Conversely, government expenditure and foreign direct investment
demonstrate negative correlations with economic growth, suggesting inefficiencies in
public spending that do not effectively enhance growth in key sectors. These findings
highlight the need for strategic allocation of government resources to areas that can
drive sustainable economic development. This research holds that mineral revenue is
not only vital for GDP contribution but also signals potential vulnerabilities; shocks to
the mining industry could lead to substantial economic repercussions. The implica-
tions of this study are crucial for policymakers aiming to optimise resource manage-
ment and ensure that mineral wealth translates into broad-based economic benefits
for Ghana.

1. Introduction
The mining sector has significantly contributed to many countries’ growth (Down & Stocks, 1977;
Madeley, 1999). In Ghana, gold mining accounts for more than 90% of the revenue from minerals
(Aryee, 2012). 23 large-scale mining companies operate in Ghana, extracting gold, bauxite, and

CONTACT Sulaiman Olusegun Atiku [email protected] or [email protected] Department of Economic and Business Sciences,
Walter Sisulu University, Mthatha, South Africa; Harold Pupkewitz Graduate School of Business, Namibia University of Science and
Technology, Windhoek, Namibia
ß 2025 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group
This is an Open Access article distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/), which
permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited. The terms on which this article has been
published allow the posting of the Accepted Manuscript in a repository by the author(s) or with their consent.
2 F. BOATENG ET AL.

manganese. These companies provide direct employment to approximately 28,000 people, while small-
scale mining enterprises are estimated to employ about one million individuals (Aryee, 2012). The miner-
als commercially mined in Ghana include gold, bauxite, diamond, and manganese, as per Ayee et al.
(2011). However, minerals like Kaolin, salt, limestone, mica, and feldspar are either under-explored or
non-explored. The majority of the mineral resources in Ghana are found along the Ashanti and Brong-
Ahafo regions and the western and eastern coasts (Aryee, 2016). In 2017, Ghana was the second-largest
gold producer in Africa, behind South Africa. Manganese and aluminium production ranked third in
Africa. Four primary mining operations are used to extract about 2500 mineral varieties in Ghana: sur-
face, underground, dredging, and artisanal mining (Balasubramanian, 2016).
According to the 2018 mining sector performance report by the Ghana Chamber of Mines, Ghana
produced almost 5 million ounces of gold in 2018, surpassing South Africa’s production of 4.2 million
ounces (World Gold Council, 2020). Ghana has retained its 8th position as the largest gold producer glo-
bally. As of 2019, Ghana still leads as Africa’s biggest gold producer. Gold Fields Ltd and AngloGold
Ashanti Ltd, two of South Africa’s largest gold producers, have increased their focus on Ghana’s gold
production due to the availability of mine deposits, which translates to lower mining costs, friendlier fis-
cal regimes, policies, and new development projects. Figure 1 shows a list of the top 10 gold-producing
countries in 2019.
According to reports, mining companies generate employment opportunities, pay taxes from mineral
production, and invest in various infrastructure developments such as education, healthcare, transporta-
tion, and power in host communities (Amponsah-Tawiah & Baah-Dartey, 2011). Additionally, mining
companies offer Corporate Social Responsibility programmes to host communities and the public (Ayee
et al., 2011). In 2011, mining firms in Ghana committed a total of USD 24 million towards CSR pro-
grammes (Ayee et al., 2011).
To determine whether mining in Ghana is beneficial, a study was conducted by Tawiah and Dartey-
Baah (2011), which revealed that the mining industry is crucial for those who live, work, or invest in
developing countries. As per Appiah and Buaben’s (2012) investigation, Ghanaian gold mining has posi-
tively affected the country’s economy. The study found that mining has benefitted local economies by
creating jobs and markets, expanding auxiliary industries, and the local consumer economy.
The Government of Ghana strategically utilises mineral revenue to enhance economic growth through
employment generation, both directly in mining operations and indirectly in support services (Yeboah &
James Nyarkoh, 2022). The economic impact of employment generation through mineral revenue is pro-
found. The mining sector contributes significantly to Ghana’s GDP (approximately 6%) and is a leading
foreign exchange earner, generating billions of Ghanaian cedis (GHS) from exports (Owusu et al., 2016;
Owusu-Antwi et al., 2016). The revenue generated from taxes and royalties paid by mining companies is
crucial for government budgets, enabling investments in infrastructure and social programmes that

Figure 1. Top 10 gold producing countries in 2019.

Source: World Gold Council (2020).
 COGENT ECONOMICS & FINANCE 3

further enhance economic growth (So €derholm & Svahn, 2015). In addition to the tax revenue, employ-
ment generated by the mining sector helps reduce poverty levels and improve living standards among
communities involved in mining activities. This aligns with broader government objectives aimed at
ensuring sustainable development and poverty alleviation in the country (Mvile & Bishoge 2024).
Despite the projected benefits of gold mining, Ghana’s mining communities are among the country’s
poorest (Appiah & Buaben, 2012). Even though gold mining enterprises of both large and small scale
operations have had a detrimental effect on the livelihoods of locals in affected communities, these
same places have become tourist destinations (Agbesinyale, 2007; Dorin et al., 2014). Unfortunately, in
the process, the economic importance of mining is increasingly being overlooked. Ghana is the conti-
nent’s second-largest gold producer, but it has yet to successfully transform its mineral wealth into
broad-based economic development (Enstie, 2017). This lack of success can be attributed to the absence
of integration between mining and other growth-promoting industries, which has led to a lower multi-
plier effect on growth (Tsikata, 2007).
Many countries, particularly those rich in natural resources, are striving to achieve enhanced eco-
nomic growth alongside sustainable increases in GDP and other socio-economic indicators. Ghana is rec-
ognised as Africa’s leading gold producer, stands out as a nation with heightened public expectations
regarding the performance of its extractive industries. The non-renewable nature of mineral resources
underscores the necessity for optimal utilisation of these resources (Saadat, 2016). Consequently, it is
imperative to periodically analyse the impact of the mining industry on Ghana’s socio-economic devel-
opment and to provide actionable recommendations for policymakers. Such analyses are essential not
only for maximising the socio-economic benefits derived from mineral exploitation but also for ensuring
that these benefits translate into tangible improvements in the living standards of the Ghanaian popu-
lace. Previous studies have explored the relationship between the mining industry and economic growth
in Ghana (Appiah & Buaben, 2012; Deller & Schreiber, 2012). However, there is still a need for further
empirical research to determine the precise impact of the mining industry on Ghana’s economic per-
formance. This empirical work seeks to contribute significantly to both theoretical frameworks and prac-
tical applications within the field of resource economics. Therefore, this study aims to investigate the
impact of the mining industry on Ghana’s economic growth and provide answers to the following
research questions.

What is the short-run relationship between mineral revenue and real GDP in Ghana?

What is the long-run relationship between mineral revenue and real GDP in Ghana?

The paper is organised into five sections. The first section is the introduction, which sets the context.
The second section covers the literature review, discussing the concepts and theories underpinning the
study. The third section describes the methodology used, while the fourth section presents the results.
The fifth section presents the study’s conclusion, recommendations, and implications.

2. Literature review
2.1. Background theory
This research draws insights from Solow’s Growth Theory (Solow-Swan Model), which was introduced in
1956 (Solow, 1956). Solow’s growth theory is a cornerstone of neo-classical economics that explains
long-term economic growth through capital accumulation, labour or population growth, and techno-
logical advancement (Knio & Houmani, 2024; Raymond, 2024). The theory posits that economic growth
is primarily driven by an increase in the stock of physical capital (machinery and infrastructure), which
enhances productivity. However, due to the principle of diminishing returns, merely augmenting capital
does not yield sustained growth; rather, it may produce a temporary increase until a steady state is
attained, at which point output per worker stabilises. In relation to labour growth, an increase in the
labour force contributes to economic growth (Alpha & Ding, 2016). In the context of Ghana, this labour
growth can be linked to demographic trends and the dynamics of the labour market. Furthermore,
technological progress plays a crucial role in long-term economic growth by enhancing productivity
4 F. BOATENG ET AL.

independently of capital and labour inputs. Solow’s growth theory underscores the interplay between
capital accumulation, labour force expansion, and technological innovation as vital components driving
long-term economic growth while recognising the limitations imposed by diminishing returns on capital.
Solow’s theory provides a valuable framework for analyzing the time series data related to mineral
revenue and economic growth. Revenue generated from minerals can be conceptualised as a form of
capital that facilitates investment in other sectors of the economy. For example, high mineral prices can
result in increased government revenues, thereby enabling public investments in infrastructure and edu-
cation that support broader economic growth. While initial investments derived from mineral revenues
may yield substantial returns, an over-reliance on these resources can lead to diminishing returns, an
occurrence observed in numerous resource-rich countries (Baafi, 2024). This observation aligns with
Solow’s predictions regarding the limitations of capital accumulation in the absence of corresponding
increases in productivity or technological advancement. According to Solow’s theory, economies tend
towards a steady state where output per worker remains constant unless disrupted by technological
innovations. In the context of Ghana, it is essential to understand how mineral revenues influence this
steady state, particularly on labour productivity and investment in human capital, as this understanding
is crucial for assessing long-term growth prospects.
Conversely, the volatility of global commodity prices poses significant risks that could impede sustain-
able growth. This concern is closely related to the term ‘Dutch disease’, wherein resource wealth leads
to currency appreciation and a subsequent decline in other sectors, such as agriculture and manufactur-
ing. Dutch disease refers to the adverse effects that can arise when a country experiences a substantial
increase in revenue from natural resources, particularly following the discovery or exploitation of such
resources (Alssadek & Benhin, 2023). The term originated in the 1970s, explicitly referencing the eco-
nomic challenges faced by the Netherlands after the discovery of extensive natural gas reserves in the
North Sea (Dekker & Missemer, 2024). Understanding these dynamics through the lens of Solow’s model
can assist policymakers in devising strategies to mitigate such risks in Ghana (Baafi, 2024).
The ‘catch-up growth’ concept is relevant for this empirical analysis in Ghana to establish how the
country leverages its mineral wealth to accelerate economic development relative to more advanced
economies. The central premise of catch-up growth is that lower-income countries can achieve higher
zwik, 2023). As lower-income countries invest
growth rates due to their initial capital deficits (Kijek & Jo
in capital and adopt technologies already used by wealthier nations, they can experience accelerated
economic growth (Almutairi, 2024). The model suggests that countries with lower initial capital per
worker can grow faster as they adopt technologies and practices from higher-income nations.

2.2. The mining industry of Ghana

Ghana has a rich geological space with abundant mineral reserves (Adu-Sarfo & Tweneboah, 2024). The
country’s principal minerals include Manganese, Bauxite, Diamonds, and Gold. Gold mining constitutes
over 95 percent of the country’s mineral revenues (Besada & Golla, 2023). The gold deposits are found
in regions such as Ashanti, Western, Central, and Brong-Ahafo (Kofi et al., 2023). Ghana has many small-
scale and artisanal mines that employ over a million people, significantly more than the number of peo-
ple employed by large-scale mining, which is around 16,000 people (Tease et al., 2023). The mining
industry in Ghana recovered after a period of general economic downturn thanks to market-based
adjustment strategies proposed by the IMF and the World Bank (Apewe, 2023; Ayitey, 2016). Most of
Ghana’s mining industry was privatised under the Economic Recovery Program (ERP) of the PNDC
administration in 1983 (Zaato, 2023). Accordingly, implementing the Structural Adjustment Program
(SAP) helped Ghana’s mining industry prosper. Ghana’s mining industry has significantly recovered since
the ERP in 1984, focused on mining as a potential source of foreign currency. The Minerals and Mining
Law was passed in 1986 to incentivise the mining industry through favourable capital allowances and
lower income taxes (Nuhu et al., 2023). Accordingly, under this law, 75 percent of capital investment can
be written off against taxes in the first year, and 50 percent of the balance can be written off against
taxes each year. The royalty payment system was also made flexible, and the government allowed
companies to utilise offshore bank accounts for servicing loans, dividend payments, and expatriate staff
compensation (Anon, 2020a).
 COGENT ECONOMICS & FINANCE 5

From 1984 to 1995, various policies were implemented to increase investor interest in Ghana’s mining
sector. These policies led to significant improvements in the mining industry’s performance. The estab-
lishment of the Mineral Commission in 1984, the promulgation of the Minerals and Mining Code in
1986, the passing of the Small-Scale Mining Law in 1989, and the establishment of the Environmental
Protection Agency in 1994 were some of the institutional improvements that helped expand the mining
industry (Nuhu et al., 2023). As Ghana’s economy has grown, its mining industry has also experienced
substantial growth in recent years.
Notably, Ghana has surpassed South Africa to become Africa’s leading gold producer as of 2019
(Besada & Golla, 2023). The mining industry plays a crucial role in the country’s economy, accounting for
41% of total export earnings, 14% of total tax revenues, and 5.5% of GDP. In 2019, gold constituted
93.28% of gross mineral revenue, while manganese and diamonds contributed 6.17% and 0.54%,
respectively (Ng et al., 2022). The predominant mining methods employed in Ghana include under-
ground and open-pit mining, with alluvial deposits mined on a smaller scale (Yalley, 2024).

2.3. Contributions of mining to Ghana’s economy

Foreign loans can be improved by combining foreign direct investment (FDI) in the mining sector with
better financial rewards from exchange rate fluctuations (Dorin et al., 2014). This represents 14% of
domestic receipts and 5% of government revenue. The mining industry has contributed 5.5% of the
country’s GDP since 2013 (Anon, 2020b). The mining sector plays a significant role in the export of
many countries in the modern world, and exchange rate fluctuations impact their profits (Ng et al.,
2022). Miners import products and services for mine organisation and activity, and a large portion of
their revenues goes back into the national economy. The export of non-fuel minerals and metals contrib-
utes significantly to many countries’ total exports, with 17 nations having total mineral exports exceed-
ing 50% of total exports in 2014 (Siakwah, 2024). Sierra Leone’s total exports are dominated by mineral
exports, accounting for 94% of the total, making it one of the most mineral exports dependent countries
(Fayiah & Fayiah, 2024). Mineral exports make up more than 70% of the GDP in Botswana, the DRC,
Mongolia, and Zambia (Ericsson & Lof, 2017).
Mining contributes differently to government income across several countries, although the distribu-
tion of earnings between national and subnational levels may vary. However, the mining industry’s long-
term contribution to income taxes must be acknowledged (Dorin et al., 2014). In Ghana, the mining
industry contributes to government revenue through direct taxes such as corporate tax, Pay-As-You-Earn
(PAYE) on employee earnings and salaries, and royalties (So €derholm & Svahn, 2015; Yeboah & James
Nyarkoh, 2022). The industry generates other revenues that help develop the economy, including social
security contributions from employees and employers, dividends to shareholders, local purchases of
equipment and consumables, and payments for electricity, water, and rent (Sampson, 2002). This schol-
arly work defines ‘Mineral Revenue’ as the industry’s total contribution to government revenue, including
Corporate Taxes, Royalties, and PAYE (Shubita et al., 2023).
Mining is a significant source of employment in Ghana. Large-scale mining and mine support services
work for approximately 28,000 people (Tease et al., 2023). Meanwhile, an estimated 500,000 people are
employed in the small-scale gold and diamond mining, quarrying, and salt industries (Besada & Golla,
2023). Recenty, the mining sector accounts for 20 percent of formal sector employment in the country,
with large scale mining businesses employing 20,000 people and small-scale artisanal mining employing
double that number (Suglo, 2024). In addition, assay laboratories, equipment leasing and sales agencies,
contract mining, road building firms, transportation companies, security companies, and catering organi-
sations contribute to the formal sector’s employment.
According to Dorin et al. (2014), new positions directly created by large mining businesses tend to be
well-paid, as indicated by the national average wage. Mining can create many indirect jobs in the supply
chain. In 2019, the Chamber’s member companies directly employed 11,899 workers, up from 10,109 in
2018 (Anon, 2020a). The majority of the 18% increase in employment was attributed to AngloGold
Ashanti’s Obuasi Mine, Newmont’s Ahafo Mine, Asanko Gold Mine, Golden Star Resources’ Wassa Mine,
and Gold Fields’ Damang Mine (Anon, 2020a). In 2019, the percentage of expatriates in the workforce
was 1.2%, slightly lower than the 1.6% recorded in 2018 (Anon, 2020b).
6 F. BOATENG ET AL.

2.4. Effects of mineral revenue on gross domestic product

Mahonye and Mandishara (2015) conducted a study on Zimbabwe’s economic development, focusing
on the significance of mineral resources. They used the Ordinary Least Square method to examine the
factors contributing to the growth of Zimbabwe’s economy. The study found that accurate manufactur-
ing and mining growth, political and property rights, and the percentage of mineral exports in total
exports were significant predictors of Zimbabwe’s economic growth. Similarly, Al Rawashdeh et al.
(2016) conducted a study assessing how mining affected Jordan’s local populations. The study selected
socioeconomic indices, namely unemployment, poverty, and human development index, in Jordan’s
Ma’an region before and after mining. The study found that Ma’an experienced a faster growth rate after
the commencement of mining activities. Despite the mining enterprises’ struggles to provide for the
local population, the rest of the world’s situation in the mining industry was not considered in the
study.
Conversely, Nhlangwini and Mongale (2019) investigated the relationship between mining production
in South Africa and its economic growth. They analysed the data using Granger causality, vector autore-
gressive, and decomposition approaches. The study found a negative relationship between the output
of gold mining and GDP. According to a study by Roy et al. (2013), the natural resource curse is inevit-
able. This implies that countries with abundant natural resources may perform worse than those without
such resources. Another study by Mobarak and Karshenasan (2012) found an unexpected negative asso-
ciation between mineral output and economic growth.
A study conducted by Salifu et al. (2013), using the Ordinary Least Square method to analyse gold
production data from 1991–2009, found that gold production and export exert no significant impact on
Ghana’s economy. The study suggests that the government needs to invest in the sector and implement
policies to encourage the private sector’s active participation in the country’s economy. In 2012, Appiah
and Buaben investigated whether gold mining had benefitted or harmed Ghana’s economy. The study
showed that mining had contributed modestly to local economies by generating employment, creating
markets, and boosting the auxiliary sectors. However, the higher marginalisation costs and abrupt shifts
in local economic paradigms often undermined these benefits, resulting in job losses and socio-eco-
nomic insecurity. Therefore, there is a pressing need for further empirical analysis to establish the impact
of mineral revenue on Ghana’s economic growth. Such empirical research is essential for expanding the-
oretical frameworks and contributing to practical applications within resource economics.

3. Data and methodology

A quantitative research methodology was employed for this study to assess both the long-term and
short-term relationships among mineral revenue, GE, FDI, and economic growth in Ghana, spanning the
years 1990 to 2019. The study utilised a causal research design encompassing 29 years, specifically from
1990 to 2019. Data pertaining to mineral revenue, GE, and real GDP was denominated in US dollars and
collected annually. The researchers secured institutional authorisation to conduct the study, and ethical
principles were rigorously adhered to throughout the research process.

3.1. Data analysis tool

The EViews software (Version 8) was used to analyse the data. The variables under consideration were
analysed using Vector Autoregression (VAR) and Granger Causality Analysis (GCA). The outcomes were
systematically presented in tables and graphs to enable comprehensive discussion. An Enhanced Dickey-
Fuller (ADF) unit root test was conducted to determine the stationarity of the data employed in the ana-
lysis. Moreover, the study implemented EViews lag length criteria to ascertain the appropriate lag length.
Lag 2 was chosen for the VAR model, as most lag selection criteria indicated it as the optimal
alternative.
 COGENT ECONOMICS & FINANCE 7

3.2. Data sources and justification of variables

Secondary data was used to achieve the research objectives. This data was collected from various
reports and publications of the Ghana Minerals Commission, Ghana Chamber of Mines, World Bank,
Bank of Ghana, and International Monetary Fund. The study’s reference period was from 1990 to 2019,
and the data was collected yearly. The study utilised time series data to gather quantitative information
on mineral revenue, Real GDP, GE, and FDI over the study period.
The mining sector in Ghana generates revenue for the government in various forms. These include
fees for mineral rights, operating permits, processing, and other licences collected by the Minerals
Commission. The Ghana Revenue Authority also collects mineral royalties, pay-as-you-earn (PAYE), cor-
porate tax, withholding tax, import duty, value-added tax, capital gains tax, customs processing fees and
destination inspection fees. Environmental payment fees are paid to the Environmental Protection
Agency, while the district assemblies and local authorities collect property rates and ground rent from
mining companies. These revenues are an essential source of income for the country. In this study, we
assume that changes in mineral revenue can affect other macroeconomic variables. Therefore, mineral
revenue is the exogenous variable we investigate in this study. The data were collected from the web-
sites of the Ghana Revenue Authority and other reliable online sources.
Government expenditure refers to the money that the government spends on various products and
services, including education, healthcare, social protection, defence, and other similar expenses. This
spending can be categorised into capital and consumption expenses. The term includes all the govern-
ment’s current expenditure on goods and services, traditionally known as general government consump-
tion. This category also covers most national security and defence spending. However, government
military spending is excluded from this category as it is part of state capital formation. The government
relies on taxes, revenue production, and borrowing to finance its spending. Mineral revenue is also a sig-
nificant source of funding for government expenditures. In the study’s model, GE was included as an
endogenous variable as it has a controlling effect on economic growth. The data used in the study is
based on current U.S. dollar exchange rates.
FDI refers to investments made by a party in one country into another country. FDI differs from for-
eign portfolio investment (FPI) because it involves a permanent interest. FDI can be achieved by inves-
ting for the long term or expanding one’s business to a foreign country. FDI is crucial to a country’s
growth, including Ghana’s. The economic progress of every nation depends on it (Coy & Comican, 2014).
In Ghana, foreign companies and investors inject capital into the mining industry, which leads to min-
ing-related FDI. External factors in the economy determine the attractiveness of the mining sector,
which, in turn, affects FDI and exogenous elements of the economy. As FDI has the potential to influ-
ence economic growth, it was included in the model.
Gross Domestic Product (GDP) refers to the total value of all goods and services produced within a
country during a specific period, including those created by domestic and foreign entities. This is a com-
mon measure used by economists to assess the overall performance of a country’s economy. GDP can
be measured in nominal and real terms. Nominal GDP measures the total monetary value of goods and
services, whereas real GDP takes inflation into account. Researchers often use real GDP to determine a
country’s position in the business cycle and measure economic growth. It is also considered an
endogenous variable in studies that analyse the impact of mineral revenue on economic development.
The summary of variables and data sources is presented in Table 1.

Table 1. Summary of variables and data sources.

Variable Measure Source
Dependent variable
Economic growth Real GDP World development indicators (WDI)
Independent variables
Mineral revenue Royalties, Corporate Taxes, PAYE, other levies Ghana Chamber of Mines, Minerals Commission
Foreign Direct Investment Direct Investment IMF
Government Expenditure General Government Final Consumption Expenditure World Development Indicators (WDI)
Source: Authors’ construct.
8 F. BOATENG ET AL.

3.3. Model specification

The models employed in this study are the Vector Autoregressive (VAR) model and the Vector Error
Correction (VEC) model. The VAR model was utilised to analyse Ghana’s real GDP growth. In contrast,
the VEC model elucidates the long-run and short-run relationships among the variables.

3.4. Vector auto regression (VAR)

This study examined the relationship between mining revenue, government spending, FDI, and eco-
nomic growth using a vector autoregressive (VAR) model. Introduced by Sims (1980), VAR relates
changes in one variable (mineral revenue) to its own and others’ past values. All variables are treated
endogenously, which removes the need for strict constraints. The model includes mineral income, gov-
ernment spending, foreign direct investment, and real GDP, with lagged dependent variables appearing
on the equation’s right side to classify it as autoregressive. A ‘vector’ in this context involves two or
more variables, and the model requires a sequence for variable inclusion. Ordinary least squares help
predict the VAR model, utilised here for predictions and outcome analysis. The model considers
unknown associations as endogenous because variable relationships are determined simultaneously.
In a VAR Model, every variable is represented as a linear function of its past lags and the past lags of
other variables in the system. For instance, the equation system for a VAR (1) involving two-time series
variables (Y1 and Y2) are as follows:
Y1, t ¼ a1 þ b11, 1 Y1, t−1 þ b12, 1 Y2, t−1 þ bp Yt−p þ e1, t (1)
Y2, t ¼ a2 þ b21, 1 Y1, t−1 þ b22, 1 Y2, t−1 þ b2p Yt−p þ e2, t (2)

Where yt is a vector of endogenous variables, a is an intercept, b is a coefficient matrice, p is the lag

length, and et is an unobservable zero-mean white noise.

3.5. VAR model

The VAR model predicts system variables and simulates shocks, creating causal relationships to observe
effects on endogenous variables. In unrestricted VAR models, several endogenous variables, notably
GDP, serve as dependent variables with independent factors as outlined by Saadat and Naderi (2020),
Mahonye and Mandishara (2015), Koitswe (2018), and Nhlangwini and Mongale (2019). Our study reveals
strong links between the independent variables and the research. We analyse Ghana’s economic growth
using mineral earnings as a proxy.
The estimated econometric model for this study is presented as follows:
GDP ¼ ðmineral revenue, GE, FDIÞ
LRGDP ¼ ðß0 þ ß1LMINREV þ ß2LGOVEXP þ ß3LTFDI þ etÞ (3)
L indicates logarithmic conversion; GOVEXP is total GE; MINREV is mining revenue; TFDI is total for-
eign direct investment. The model has three coefficients: intercept, parameters, and slope (ß1 to ß3).
The error term, t, accounts for unmodeled variables that may influence the dependent variable and is
assumed to be homoscedastic and serially correlated.

3.6. Vector error correction model (VECM)

It’s a VAR model with co-integration restrictions, known as VECM. This vector error correction model
incorporates an error correction term based on the co-model of the VAR variables. Once equilibrium
conditions are established, the model’s response over time is described relative to long-term
equilibrium.
Inconsequential variables can be removed from a dynamic model while preserving the error correc-
tion term. Long-term equilibrium is achieved by correcting disequilibrium through a longer error correc-
tion period (Engle & Granger, 1987). It is a VAR in its initial difference form with added vector
cointegrating residuals (Xu & Lin, 2015).
 COGENT ECONOMICS & FINANCE 9

A simple error correction term is defined as:

ECT ¼ yt – bxt (4)
Where b is the cointegrating coefficient and bxt the error term from the regression of yt on xt
The Vector Error Correction Model (VECM) is given as;
Y X
k
Dyt ¼ y−1
þ Ci Dyt−1 (5)
i¼1

The equation above represents an ECM applicable in a multivariate model. This study examines four
variables: Real GDP (RGDP) as the dependent variable and Mineral Revenue (MR), GE, and FDI as the
independent. Inspired by VAR modelling and Equations 1 and 2, the error correction model is extended
to the following equations (Koitswe, 2018):
DRGDPt ¼ ao þ a1 LRGPt−1 þ a2 MRt−1 þ a3 GEt−1 þ a4 FDIt−1 þ a5 ECT t−1 þ et (6)
DMRt ¼ bo þ b1 LRGPt−1 þ b2 MRt−1 þ b3 GEt−1 þ b4 FDIt−1 þ b5 ECT t−1 (7)
DGEt ¼ ko þ k1 LRGPt−1 þ k2 MRt−1 þ k3 GEt−1 þ k4 FDIt−1 þ k5 ECT t−1 (8)
DFDIt ¼ Wo þ W1 LRGPt−1 þ W2 MRt−1 þ W3 GEt−1 þ W4 FDIt−1 þ W5 ECT t−1 (9)
The ECTt−1 is a lagged error correction term in long-run cointegrating relationships. A first difference
vector autoregressive model (VAR) is created from these equations, acting as a VECM with cointegrating
residuals. Assuming endogenous variables (yt), we obtain two square matrices dependent on the mod-
el’s coefficients. To calculate the long-run parameter, multiply it by the first difference operator and add
a white noise term e. This is achieved by taking the product of co-integration vectors and the co-
integration matrix. When the cointegration vector is in an equation, it is weighted by a matrix contain-
ing long-run relationship coefficients and another matrix with speed adjustment parameters (Xu & Lin,
2015).

3.7. Test for stationarity

Utilising EViews, the Augmented Dickey-Fuller (ADF) Unit Root Test was employed to ascertain the sta-
tionarity of the data used in the Vector Autoregression (VAR) model. The results indicated that, following
the first differencing, Mineral Revenue, Government Spending, FDI, and Real GDP exhibited stagnation.
This assessment satisfied the condition of data stationarity and reaffirmed the integrity of the data used
in the analysis.

3.8. Analysis of outliers

Using secondary data, we meticulously monitored for outliers and diligently endeavoured to balance the
retention of valuable information with the accuracy of our analysis. Our rigorous methodologies signifi-
cantly mitigated outliers’ impacts, thereby preserving our findings’ integrity.

4. Results
This section’s analysis used the Eviews software (version 12). The Augmented Dickey-Fuller (ADF) Unit
Root Test was performed to determine whether the data used in the VAR model were stationary.
Descriptive statistics such as mean, median, minimum, maximum, standard deviation, skewness, and kur-
tosis were presented for all study variables. Vector Autoregression (VAR), Granger Causality Analysis, and
the Vector Error Correction Model (VECM) were used to analyse the variables.

4.1. Descriptive statistics

Table 2 presents the descriptive statistics for the variables examined in this study. The results indicate
that the average value for Mineral Revenue (MR) from 1990 to 2019 was $219 million, with a median of
$63.48 million. The highest revenue over the study period was $778 million, achieved in 2012, while the
10 F. BOATENG ET AL.

Table 2. Descriptive statistics for the variables of the study.

MR GE FDI RGDP
Mean 219 2450 1,380 27,700
Median 63.48 1360 238 22,800
Maximum 778 6820 3,880 57,300
Minimum 9.61 507 14.80 12,100
Std. Dev. 252 2160 1490 13,900
Skewness 1.003074 0.778933 0.430424 0.707765
Kurtosis 2.585775 1.927579 1.347544 2.162936
Observations 30 30 30 30
Source: Emerged from statistical analysis (2024).

lowest was $9.61 million in 1991. The deviation of revenue from the mean was $252 million, with a
skewness value of 1.003. The kurtosis was 2.585775, indicating a peaked distribution, according to Hair
et al. (2017). These findings suggest that the Government of Ghana has generated an average of $219
million in mineral revenue over the past 20 years.
The average value of GE was $2450 million, with a median of $1360 million. The largest expenditure
was $6820 million, and the smallest was $507 million. These expenditures were made in 2013 and 2000,
respectively. The deviation from the average was $2160 million, with a skewness of 0.778933 and a kur-
tosis of 1.927579. The expenditure values indicated a peaked distribution.
Upon further analysis, the average FDI made over the study period was $1380 million. The median
value of the investments was $238 million, and the deviation from the mean was $1490 million. The
minimum investment made during this period was $14.80 million, while the maximum was $3880 mil-
lion. It should be noted that the investment figures were skewed by 0.430424, with a kurtosis of
1.347544.
The Real GDP’s descriptive statistics reveal that the mean was $27,700 million, the median was
$22,800 million, and the standard deviation was $13,900 million. The highest Real GDP recorded during
the study period was $57,300 million, and the lowest was $12,100 million. Furthermore, the skewness
was 0.707765, and the kurtosis was 2.162936. These results indicate that the distribution peaked.

4.2. Unit root test

Stationarity tests are used to determine whether a time series is stationary or not. A time series is con-
sidered stationary if its statistical properties, such as expectation, variance, and autocorrelation, remain
constant over time. If a series is not stationary, it can be examined to determine the cause of non-statio-
narity, and it can be made stationary through differencing. VAR analysis can be performed on the first
differentiated time series in such cases. In this study, the augmented Dickey-Fuller unit root test (ADF)
was used to test for stationarity in the data series. The results of the stationarity test are presented in
Table 3.
Table 3 shows the results of the stationarity test conducted on the first differenced variables used in
the study. The probability value for Mineral Revenue was 0.0075; for GE, it was 0.0000; for FDI, it was
0.0021; and for Real GDP, it was 0.0002. As all the probability values were less than the critical value of
0.05, we can conclude that the data for all variables are stationary in first difference. This means that the
data are valid and reliable for further analysis. The next step was to select the optimal lag for the study.

Table 3. First differenced test for stationarity (Unit roots test results).
Variables Test T-statistic at Intercept Critical value at 5% Probability Results
LRGDP ADF −1.681(0) −2.972 0.0002 I(1)
LMR ADF −0.821(0) −2.976 0.0075 I(1)
LGE ADF −6.921(0) −2.972 0.0000 I(1)
LFDI ADF −4.334(0) −2.972 0.0021 I(1)
Notes: Lag length/bandwidth in a bracket.
I (1): Integrated at order 1.
Source: Emerged from statistical analysis (2024).
 COGENT ECONOMICS & FINANCE 11

4.2.1. Test for stationarity

By using stationarity tests, we can determine whether a time series is stationary. A stationary time series
has statistical features that remain constant over time, such as expectation, variance, and autocorrel-
ation. If we find that a series is not stationary, we can investigate what causes it to be non-stationary.
Sometimes, a non-stationary series may have a stationary difference. In such cases, we can perform a
VAR analysis on the first differentiated time series (Koitsiwe, 2018).
The study utilised the augmented Dickey-Fuller unit root test (ADF) to determine the stationarity of
the data series. However, the variables did not refute the presence of a unit root, as the test statistic
exceeded the crucial value at a 5% significance level. As a result, the findings indicate that none of the
variables are stationary but only stationary at the beginning of the difference. Since the variables are
integrated in the same order, the Johansen cointegration test can be used to determine their long-term
relationship. The null hypothesis testing is shown in Table 4.
Table 4 displays the results of a stationarity test conducted on the study’s variables at Levels. The var-
iables include Mineral Revenue, GE, FDI, and Real GDP. The Augmented Dickey-Fuller (ADF) Unit Root
Test was conducted on the time series data, and the results show that the probability for Mineral
Revenue and GE are 0.9682 and 0.8775, respectively. The probability for FDI and Real GDP are 0.9617
and 0.9998, respectively. Since all variables show a probability greater than the critical value of 0.05, the
time series data are invalid at Levels and cannot be relied upon for further analysis. Therefore, a statio-
narity test must be conducted at the First difference to determine whether the probabilities will be less
than the critical value and whether the data can be used for further analysis.

4.2.2. Optimal lag selection test results

Choosing the appropriate lag order is crucial in empirical research that involves the vector autoregres-
sive (VAR) model. This is because the correct model specification is necessary for all inferences. Several
studies have established the significant impact of lag duration selection. Selecting a larger order lag
length than the correct one increases the VAR’s mean square prediction errors, as per Lu €tkepohl (1993).
On the other hand, underfitting the lag length often results in auto-correlated errors, while fitting the
lag length too closely also leads to errors.
Several criteria, including the Akaike Information Criterion, the Schwartz Information Criterion, the
Hannan-Quinn criterion, the log probability, and the mean square error, were used to determine the
ideal delay duration in a time series. The EViews lag length criterion was used to assess the optimal lag
length in the study, which is reported in Table 5.
Table 5 presents five information criteria for selecting the optimal lag. These criteria include the
sequential modified LR test statistics, final prediction error, Akaike information criterion, Schwarz infor-
mation criterion, and Hannan-Quinn information criterion. According to all the criteria, the optimal lag
for the model was 2. Therefore, the study used a lag of 2 for the model.

Table 4. Null Hypothesis Testing at Levels.

Variables Test T-Statistic at intercept Critical value at 5% Probability
LRGDP ADF 2.154 −2.971 0.9998
LMR ADF 0.210 −2.976 0.9682
LGE ADF −0.499 −2.967 0.8775
LFDI ADF −0.117 −2.967 0.9617
Source: Emerged from statistical analysis (2024).

Table 5. Lag selection results.

Lag LogL LR FPE AIC SC HQ
0 −2455.335 NA 2.3e þ 71 175.667 175.857 175.725
1 −2381.311 121.611 3.70e þ 69 171.522 172.474 171.813
2 −2337.823 59.019 5.62e þ 68 169.559 171.272 170.082
denotes optimal lag length order selected by the criterion.
Source: Emerged from statistical analysis (2024).
12 F. BOATENG ET AL.

4.2.3. Cointegration test results

The Trace and Maximum Eigenvalue Statistics display the cointegration outcomes of the study’s varia-
bles. The results indicate the presence of four cointegration equations. However, using the Johansen
Cointegration Technique, the variables were discovered to be cointegrated at order 1, as shown in Table
6. This is demonstrated by the fact that both test statistics are more significant than the crucial value of
0.05 for all variables in order 1. The investigation rejects the null hypothesis, which assumes no cointe-
gration between the variables. The results show at least one cointegration equation exists, proving a
long-run economic link between the variables.
The concept of cointegration allows us to determine whether two or more non-stationary time series
have an equilibrium or stationary relationship (Banerjee et al., 1993). Short-run shocks that may alter
movement in individual series will converge over time (in the long run). The Vector Error Correction
model is utilised for estimation.
The analysis provided the results of the long-term relationship between the dependent variable
(LRGDP) and its regressors by using simple normalised cointegrating coefficients. To obtain the long-
term results effect, values are substituted for 1 to 3 in Equation 10 to obtain the correct parameters and
slopes of the coefficients in the model. Therefore, the econometric long-term equation is presented as
follows:
LRGDPt ¼ b0 þ 2:323LMR – 1:116LGE – 0:767LFDI þ e (10)
The long-term results show a positive relationship between LMR and LRGDP, while LGE and LFDI
negatively correlate with the dependent variable. Based on the coefficient values, a 1% increase in LMR
leads to a 2.323% increase in LRGDP. However, a 1% increase in LGE and LFDI results in a 1.116% and
0.767% decrease in LRGDP, respectively, in Ghana.

4.2.4. Estimation of VECM (short-run results)

The study sought to examine the intricate relationship among mineral revenue, government expend-
iture, foreign direct investment, and economic growth by formulating two vector autoregressive models
(VAR and VEC) utilising the same time series data. The error correction term within the Vector Error
Correction Model (VECM) estimates a causal linkage between the aforementioned variables. Employing
the VECM approach, a short-term association among the variables was identified, as illustrated in Table
7. The statistically and economically significant error correction term assumes a predicted negative value
(−0.028), signifying an annual disequilibrium of 2.8% between the dependent variable (LRGDP) and the
independent variables, which can be rectified and restored to equilibrium in a relatively swift manner. In
the long run, the consistently increasing negative value of the error correction term suggests a trend
towards stabilisation. Furthermore, the independent variables account for over 40% of the variance in
Real GDP, as indicated by the Adjusted R-squared, while in the short run, they contribute 40.3% to the
growth of Real GDP.

Table 6. Johansen-cointegration test.

Maximum-eigen value Trace Test
Hypothesized Max-Eigen 0.05 Critical Hypothesized Trace 0.05 Critical
No. of CE (s) Eigenvalue Statistic Value No. of CE (s) Eigenvalue Statistic Value
None 0.756 38.133 27.584 None 0.756 58.511 47.856
At most 1 0.410 14.264 21.131 At most 1 0.410 20.377 29.797
At most 2 0.177 5.274 14.264 At most 2 0.177 6.112 15.495
At most 3 0.031 0.839 3.841 At most 3 0.031 0.839 3.841
Max-eigenvalue and trace tests indicate 1 cointegrating eqn(s) at the 0.05 level.
denotes rejection of the hypothesis at the 0.05 level.
Source: Emerged from statistical analysis (2024).

Table 7. Normalised cointegrating coefficients.

LRGDP LMR LGE LFDI
1.000 −2.323 1.116 0.767
(0.318) (0.205) (0.196)
Source: Emerged from statistical analysis (2024).
 COGENT ECONOMICS & FINANCE 13

A short-term association between variables is established using the VECM method, as shown in Table
7. Statistically and economically, the error correction term is substantial and takes on the predicted
negative sign. With this coefficient (−0.028), an annual disequilibrium of 2.8% between the dependent
variable (LRGDP) and independent variables may be addressed more quickly and brought back to bal-
ance. In the long run, an increasing negative sign on the ECT indicates that things are stabilising.
RGDP’s variance is explained by more than 61% and 40% of the independent variables, respectively,
according to R-squared and adjusted R-squared.

4.2.5. Diagnostics and stability test results

The researchers conducted a series of experiments to ensure the accuracy of the findings. As a result,
the model has passed all diagnostic tests since the null hypothesis has not been rejected. This suggests
that the model is well-defined and reliable. Furthermore, the model has shown an excellent fit within
the 0.05 significance threshold, indicating its stability throughout the research.

4.2.5.1. Autocorrelation/serial correlation. Autocorrelation occurs when the error terms in a time series
persist from one period to another, leading to inefficiency in Ordinary Least Square Output, overemphas-
ised goodness-of-fit, and false and large t-static values. However, a residual LM test was conducted to
verify the presence of serial correlation, which indicated that there was no autocorrelation in the analy-
sis’s errors. This is because the test’s t-static value is 17.579, greater than the p-value of 0.05.

4.2.5.2. Residual normality test. In this study, we explored the use of normality tests to see how well
our data set aligns with a normal distribution. This helped us to understand how likely it is for a random
variable in our data to be normally distributed. To carry out a thorough and effective analysis of VAR
estimations, it’s essential that the errors of the VAR system follow a normal distribution. We discovered a
combined p-value of 4.417, which is significantly larger than the conventional threshold of 0.05. This
finding leads us to reject the null hypothesis regarding multivariate residuals. Therefore, it suggests that
the errors in our system don’t conform to a normal distribution, guiding us towards important consider-
ations in our analysis.

4.2.5.3. Heteroscedasticity test. Heteroscedasticity is not a problem since the variance is constant.
Economic analysis is possible as the LRGDP systems equation is stationary and homoscedastic.

4.2.6. Variance decomposition

The variance decomposition determines how much a shock or impulse in one variable contributes to
random movement in other variables. Observing how the variables change over time is important for
predicting the effects of other variables in the same regression equation (Lanne & Nyberg, 2014).
The first row of Table 8 displays the results of real GDP variance decomposition innovations in the
short run, year 2. Shocks to LRGDP contribute 26.913% of the variance in its own shock, while shocks to

Table 8. VECM estimation results.

Dependent variable: D(LRGDP)
Variable Coefficient Standard error T-statistic
ECT(−1) −0.028 0.014 −1.959
C 0.050 0.019 2.573
D (LRGDP(−1)) −0.047 0.310 −0.151
D (LRGDP(−2)) −0.007 0.268 −0.029
D (LMR(−1)) 0.033 0.021 1.581
D (LMR(−2)) −0.001 0.018 −0.059
D (LGE(−1)) 0.001 0.021 0.032
D (LGE(−2)) −0.025 0.020 −1.225
D (LFDI(−1)) 0.012 0.013 0.924
D (LFDI (−2)) 0.013 0.010 1.307
R-Squared 0.609
Adjusted R-Squared 0.403
Significance level: 10%.
Source: Emerged from statistical analysis (2024).
14 F. BOATENG ET AL.

Table 9. Diagnostics test results.

Test Null hypothesis (Ho) Statistic p-Value Conclusion
Breusch-Godfrey LM No Serial Correlation 17.579 0.349 Do not reject H0
Glesjer No Heteroscedasticity 173.572 0.219 Do not reject H0
Jarque-Bera Normality 4.417 0.818 Do not reject H0
Source: Emerged from statistical analysis (2024).

Table 10. Variance decomposition results.

Variables Periods LRGDP LMR LGE LFDI
LGDP 2 26.913 67.357 5.706 0.025
10 31.470 57.501 1.460 9.568
LMR 2 1.815 94.568 2.349 5.970
10 4.925 81.454 5.356 8.265
LGE 2 0.506 65.518 32.209 3.621
10 3.105 65.025 26.776 4.083
LFDI 2 0.331 54.386 1.590 43.692
10 3.105 57.770 13.419 25.705
Source: Emerged from statistical analysis (2024).

LMR account for 67.357% of the variance in LRGDP. Shocks to LGE and LFDI have an insignificant influ-
ence, with 5.706% and 0.025% variance, respectively, in LRGDP.
The results of the heteroscedasticity analysis are presented in Table 9.
In the long run, which is year 10, shocks to LRGDP, LMR, LGE, and LFDI contribute to 31.470%,
57.501%, 1.460%, and 9.568%, respectively, of variations in LRGDP. Hence, the variance decomposition
results are indicated in Table 10. These results suggest that LRGDP strongly accounts for itself, LMR has
a stronger influence on LRGDP, LGE poorly influences LRGDP due to declining effects, and LFDI shows
promising influences on LRGDP in the long run.

4.2.6.1. Variance decomposition of LMR. In the short term, fluctuations in the LMR account for
94.568% of the variation in Mineral Revenue (MR), while fluctuations in LRGDP, LGE, and LFDI contribute
1.815%, 2.349%, and 5.970% respectively. In the long run, specifically after a duration of 10 years, shocks
in Mineral Revenue (MR) account for 81.454% of its variability, whereas fluctuations in LRGDP, LGE, and
LFDI result in increases of 4.925%, 5.356%, and 8.265% in LMR, respectively. These findings indicate that
LMR is highly self-referential, with the impact of LRGDP on LMR being statistically insignificant.
Furthermore, fluctuations in MR contribute significantly to its variability in both the short and long term.
This implies that shocks in GDP, GE, or FDI do not significantly affect the fluctuations in MR, either in
the short or long run.
The findings suggest that there is no significant relationship between LGE and LRGDP in the short
term. This conclusion is reinforced by evidence indicating that a shock of 0.331% to LRGDP, resulting
from LFDI, does not yield a significant impact. Conversely, in the long term, LFDI may affect changes in
LRGDP by 3.105%. Moreover, LMR continues to demonstrate a more pronounced influence on changes
in LFDI, quantified at 54.386% and 57.770% in the short and long term, respectively.
There exists no significant correlation between local government expenditure (LGE) and local govern-
ment revenue (LRGDP) in either the short or long term. This phenomenon is substantiated by the negli-
gible effects of only 0.506% and 3.105% on alterations in LRGDP in the short and long term,
respectively. Conversely, the local main revenue (LMR) serves as a more potent determinant in forecast-
ing variations in government spending, manifesting fluctuations of 65.518% and 65.025% in LRGDP in
the short and long term, respectively. LGE shocks have exhibited a continued decline over time, thereby
rendering them a less robust predictor of their own outcomes. Furthermore, LGE, local foreign direct
investment (LFDI), and local gross domestic product (LGDP) do not significantly impact changes in gov-
ernment expenditure (GE).

5. Discussion
The findings of the study reveal significant insights into the relationship between mineral revenue and
real GDP in Ghana, emphasising the predictive capacity of mineral revenue on economic performance.
 COGENT ECONOMICS & FINANCE 15

The identification of a uni-directional causality through Granger causality analysis indicates that fluctua-
tions in mineral revenue can effectively forecast changes in real GDP. This suggests that the mining sec-
tor plays a vital role in shaping the economic landscape of Ghana. Moreover, the study highlights that
shocks to mineral revenue not only account for its variability but also exert considerable influence on
GE, GDP, and FDI. This underscores the interconnectedness of these economic variables and the substan-
tial impact that mineral revenue has on broader economic indicators. The analysis further demonstrates
that changes in real GDP from 1990 to 2019 were predominantly driven by variations in mineral rev-
enue, reinforcing the notion that the mining sector is a critical determinant of economic growth in
Ghana. This finding diverges from previous studies, such as those by Appiah and Buaben (2012),
Koitsiwe (2018), Salifu et al. (2013), and Walser (2002), which explored how different aspects of mining
impact on economic development but may not have established a direct predictive relationship
between mineral revenue and GDP.
The current findings align with findings from previous research, such as that by Al Rawashdeh et al.
(2016), which examined the socio-economic impacts of mining on local communities in Jordan. While Al
Rawashdeh et al. (2016) focused on the socio-economic dimensions and local community impacts, it
similarly acknowledged the critical economic contributions of mining sectors to national economies. In
contrast to previous research, the current study offers a more specific examination of how mineral rev-
enue directly influences GDP and other economic variables. While Al Rawashdeh et al. highlighted the
socio-economic benefits and challenges faced by local communities due to mining activities, this study
underscores the quantitative predictive capacity of mineral revenue on national economic performance.
While the current study concentrates on the predictive influence of mineral revenue on economic
growth in Ghana, Darko (2015) adopts a multifaceted approach to understanding economic growth by
highlighting various determinants, such as agricultural productivity, investment levels, and macroeco-
nomic stability. In contrast, our findings position mineral revenue as a critical determinant of economic
growth in Ghana, whereas Darko (2015) provides a comprehensive analysis encompassing multiple
growth factors.
Comparing our findings with those reported by Kofi et al. (2023), who investigated the contributions
of Ghana’s mineral resources to the global economy with a specific focus on bauxite, notable similarities
and differences emerge. Both studies acknowledge the indispensable role of mineral resources in pro-
moting economic growth. However, Kofi et al. place greater emphasis on the global context and implica-
tions associated with specific minerals such as bauxite. In contrast, our study offers a more localised
analysis that explicitly links mineral revenue to real GDP. Furthermore, Kofi et al. elaborate on how vari-
ous minerals contribute differently to Ghana’s economy and their respective roles in international mar-
kets. This perspective complements the findings of the current study by providing a broader framework
for understanding how specific minerals can influence both national and global economic dynamics.
While previous studies underscore the significance of mineral resources, this research distinctly concen-
trates on the predictive relationship between mineral revenue and real GDP, elucidating how fluctua-
tions within the mining sector can serve as indicators of economic performance.
In relation to a study conducted in Zimbabwe, Mahonye and Mandishara (2015) discuss the potential
for a resource curse; whereby resource-rich countries may experience slower economic growth due to
factors such as volatility in commodity prices and governance issues. The current study specifically eluci-
dates the direct predictive relationship between mineral revenue and economic growth in Ghana. In
contrast to Mahonye and Mandishara’s exploration of the broader implications of mining on economic
growth, including potential pitfalls associated with resource dependence, our findings focus on how fluc-
tuations in mineral revenue serve as reliable indicators of economic performance. While both studies rec-
ognise the importance of mining resources, our research provides a more focused analysis on the
positive predictive capacity of mineral revenue within Ghana’s economy.
In contrast to previous studies, which often focused on the broader implications of mining activities
without delving into causal relationships, this study provides a comprehensive understanding of how
mineral revenue serves as both a predictor and a significant contributor to real GDP growth. The unique
emphasis on the predictive power of real GDP for mineral revenue further adds complexity to the dis-
course, suggesting a reciprocal relationship that merits further exploration in future studies.
16 F. BOATENG ET AL.

5.1. Theoretical contribution

The results of the study are consistent with Solow’s Growth Theory, which posits that economic growth
is driven by factors such as capital accumulation, labour force growth, and technological advancement.
In this context, mineral revenue can be regarded as a critical component of capital accumulation, facili-
tating investment in infrastructure and other productive capacities that enhance overall economic out-
put. The findings indicate that shocks to mineral revenue not only account for their own variability but
also exert considerable influence on GE, GDP, and FDI. This interconnectedness highlights the substantial
impact that mineral revenue has on broader economic indicators.
The analysis further demonstrates that changes in real GDP from 1990 to 2019 were driven by varia-
tions in mineral revenue, reinforcing the notion that the mining sector is a crucial determinant of eco-
nomic growth in Ghana. This research outcome aligns with Solow’s framework, which emphasises the
significance of resource endowments and their effective management for sustainable economic growth.
This study established the relationship between mineral revenue and real GDP by highlighting the sig-
nificant role of strategic resource management in promoting sustainable economic development.
Therefore, the findings contribute to Solow’s Growth Theory by illustrating how mineral revenue acts as
a vital factor in capital accumulation and overall economic performance in Ghana. In contrast, previous
studies by Mahonye and Mandishara (2015) and others often discuss the potential for a resource curse,
whereby reliance on mineral resources can lead to negative economic outcomes if not managed effect-
ively. However, this study presents a more optimistic perspective by demonstrating how mineral revenue
can serve as a positive predictor of economic growth when effectively harnessed.

5.2. Practical implications

Based on the findings emanating from a time series analysis of mineral revenue and economic growth
in Ghana, we propose a set of practical implications for the policymakers in the mining sector. Given the
historical significance and substantial contributions of Ghana’s mining sector to the national economy, it
is essential for the country to draft a new mining code that attracts FDIs and supports local stakeholders.
This code should not only aim to attract FDI but also promote sustainable value generation within the
local economy. This approach can help the country maintain its position as a leading mining destination
in Africa and contribute to the overall economic well-being of its citizens. The small-scale mining sector
must be integrated properly, and local players in the industry should be supported through various
growth paths to ensure sustainability. A value addition to the local economy involves the integration of
the small-scale mining sector, which has traditionally been marginalised despite its potential for eco-
nomic empowerment. This will provide the required robust support mechanisms for local players. With
this arrangement, the government can cultivate a more inclusive growth trajectory that enhances the
overall resilience of the mining industry.
A thorough review of the regulatory framework governing mining operations (Magazzino, 2024) is
equally crucial for the recognition of small-scale mining and, ensuring stringent enforcement of regula-
tions within the industry. Establishing a financial cap as a prerequisite for obtaining small-scale mining
licences would impose necessary environmental, social, and fiscal responsibilities on concession holders,
thereby promoting sustainable mining practices in Ghana. Moreover, promoting local ownership struc-
tures in large-scale mining ventures can mitigate capital flight associated with multinational corpora-
tions, ensuring that a greater share of mineral proceeds remains within Ghana. This strategic alignment
of policies and regulations will not only enhance local participation but also contribute to a more equit-
able distribution of wealth generated from Ghana’s rich mineral resources.
Furthermore, it is imperative that the government diversifies its focus beyond the extractive sector to
include the development of non-traditional mineral exports and service industries. A multifaceted
approach is likely to create synergies that could significantly propel economic growth and reduce
dependency on a singular sector. To optimise such efforts, it is essential for the government to imple-
ment well-considered incentives aimed at encouraging industry stakeholders, thereby stimulating pro-
duction levels that translate into tangible fiscal benefits for the country.
 COGENT ECONOMICS & FINANCE 17

5.3. Limitations of the study

The study’s findings may not remain valid over an extended period due to variations and circumstances
that may occur from one year to another. These variations could lead to significant or minimal changes
in ranking factors. Consequently, these studies must be undertaken routinely to ensure policymakers are
appropriately updated for decision making and planning. Furthermore, the Ghana Chamber of Mines
experienced delays in releasing its performance report on the mining industry. As a result, the research-
ers could not access the most recent report, specifically for the year 2020, during the research.
Furthermore, it is recommended that additional research be conducted to comprehensively examine
the contribution of minerals such as gold, bauxite, and manganese, as well as other industrial minerals,
including salt, clay, sand, granite and limestone, among others, to the nation’s economic performance.
This analysis will facilitate informed decision-making among policymakers regarding reinvestment strat-
egies and targeted diversification efforts.

6. Conclusion
The primary objective of this study was to investigate the impact of mineral revenue on economic
growth in Ghana. The findings provide compelling evidence of the substantial influence that mineral rev-
enue has on the country’s economic performance. Our analysis revealed a uni-directional causality, indi-
cating that fluctuations in mineral revenue not only predict changes in real GDP but also play a critical
role in shaping Ghana’s economic trajectory. Moreover, the study established a clear interconnectedness
between mineral revenue and broader economic indicators, such as FDI and GDP, underscoring the min-
ing industry’s pivotal role within Ghana’s economic landscape.
The managerial implications derived from our research suggest that the strategic management of
mineral resources is essential for sustainable economic development in Ghana. With proper utilisation of
mineral revenues and enhancing local participation in the mining sector, policymakers can create a
more resilient economy that capitalises on its natural resources while ensuring equitable benefits for all
stakeholders involved.

Authors’ contributions
GEW: conceptualised, data collection, analysis and interpretation of results; FB: conception, supervision, writing draft;
SOA: supervision and writing revision. All authors have read and agreed to the published version of the manuscript.

Disclosure statement
No potential conflict of interest was reported by the authors.

Funding
This research received no external funding.

About the authors

Dr Frank Boateng is a Vice Dean of the Office of Research, Innovation and Consultancy (ORIC) at the University of
Mines and Technology (UMaT) in Ghana, where he oversees the development and implementation of the universi-
ty's research agenda, innovation strategy, and consultancy services. He is also a Senior Lecturer of Management
Practice in Accounting at UMaT, teaching and mentoring students and faculty on various accounting and finance
topics. He holds multiple credentials as a Chartered Global Management Accountant (CGMA), a Chartered
Management Accountant (CIMA), a Chartered Accountant in Ghana (CA GH) and Certified Practicing Accountant in
Australia (CPA). Dr. Boateng has over twenty (20) years’ experience in the Mining Industry and has occupied posi-
tions from Assistant Accountant, Senior Accountant, Accounts Payables Manager, Senior Business Analyst, Financial
Controller, Finance & Administration Manager, Commercial Manager, Country Managing Director and Group CEO. Dr
Boateng has a proven track record of raising funds, building mines, and providing strategic business and risk man-
agement advice to various stakeholders. He currently serves as an advisor and board member of several boards in
Ghana, and has published several papers and books on corporate governance, sustainability and circular economy.
18 F. BOATENG ET AL.

He is passionate about advancing education and innovation for the sustainable development of the extractive
industry and the 2030 Agenda.
Ing. Wisdom Edem Gomashie is a Mining Engineer with experience in mining operations, mine legislation, policy,
and related matters. He is a registered member of the Ghana Institution of Engineering (GhIE) and the West African
Institute of Mining, Metallurgy and Petroleum (WAIMM). With over seven years of experience in the mining industry,
Wisdom currently serves as an officer with the Minerals Commission of Ghana. Wisdom is currently pursuing a
Doctor of Engineering (D-Eng) in Mining Engineering at the University of Mines and Technology (UMaT). He pos-
sesses a Master of Arts in Natural Resources Law from the University of Ghana, an MSc in Engineering Management,
a BSc in Mining Engineering (First Class Honours) from UMaT, and a certificate from the 2024 Summer School on
the Governance of Extractive Industries in Anglophone Africa, organised by the African Centre for Energy Policy
(ACEP).Wisdom worked as a Mining Engineer with Goldfields Ghana Limited at Tarkwa Gold Mine and Ghana
Manganese Company, Nsuta Mine before joining Ghana’s Minerals Commission in 2021. From 2021 to 2025, Wisdom
served as the Special and Technical Assistant to the Honourable Deputy Minister of Lands and Natural Resources of
the Republic of Ghana.
Sulaiman Olusegun Atiku is currently the Director of Research and a Professor in Human Resource Management at
Harold Pupkewitz Graduate School of Business (HP-GS B), Namibia University of Science and Technology, Namibia.
Prof. Atiku is an adjunct professor of human resource management at Walter Sisulu University, South Africa. He is a
pragmatic researcher specializing in strategic human resource management. His current research areas of interest
include human capital formation for the fourth industrial revolution and advanced green human resource manage-
ment practices. He has over 16 years of experience in higher education. He has lectured in several courses in his
field and published many scholarly articles in several international journals. He is a member of the International
Labour and Employment Relations Association (ILERA), the Nigerian Institute of Management (NIM), and the Institute
of People Management (IPM) in South Africa.

ORCID
Frank Boateng http://orcid.org/0000-0002-6347-4997
Sulaiman Olusegun Atiku http://orcid.org/0000-0001-9364-3774

Data availability statement

The datasets utilised and analysed in this study can be obtained from the corresponding author upon reasonable
request.

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