Financial Development-International Trade Nexus in Ghana: The Role of Sectoral Effects

This study investigates the role of sectoral effects in the financial development-international trade nexus using time series data from Ghana for the period 1960 to 2017. Our evidence from the autoregressive distributed lag (ARDL) estimates indicates that while the effect of sectoral value additions on trade is conditional on the proxy of financial development, financial development significantly promotes trade in both the long- and short-run, regardless of the proxy. Moreover, even after accounting for sectoral value additions, finance positively affected international trade. On the moderation front, we observe that increased agricultural value additions mitigate the beneficial impact of financial development on international trade, whereas increased service value additions magnify the beneficial effects. Thus, to boost international trade in Ghana, policymakers should prioritise fostering complementarity between the industrial, agricultural, service, manufacturing, and financial sectors.