GOVERNMENTEXPENDITUREONECONOMICGROWTH:EMPIRICAL EVIDENCE FROM GHANA

In free market finance, the government plays an essential role. The government really does a lot for an economy. When markets can't solve problems on their own, governments must step in to offer public goods, address externalities, and enforce competition. The issue for every economy that wants its government to fulfill its function is finding the right size of government (total expenditures by the government as a percentage of GDP) to promote long-term prosperity. Government spending in Ghana has increased over the previous two decades, according to data on fiscal behavior, but GDP growth has lagged behind. Using a time series data analysis, this study aimed to shed new empirical light on the connection between government size and economic growth in Ghana, as well as identify the optimal threshold level at which government final consumption may contribute to rapid development. The research found that higher levels of government spending contributed directly to economic expansion. The analysis concluded that a threshold of 0.114% for government spending was optimal for promoting growth in the economy. Therefore, the study urges fiscal discipline and control to maintain the optimal level of government spending, which would have a multiplier effect on other parts of the economy and prevent crowding out.