Hierarchical Bayesian Modelling of Macroeconomic Variables in Ghana

Abstract This study analyzed the impact of macroeconomic variables (manufacturing, real exchange rate, government expenditure, and gross fixed capital formation) on GDP growth in Ghana. Utilizing secondary data from the World Development Indicators of the World Bank (1991–2021), we employed a hierarchical Bayesian linear model with interaction effects to assess these relationships. The results indicate that the real exchange rate, manufacturing, and government expenditure have a positive influence on GDP growth, while gross fixed capital formation exhibits a moderately negative effect. To enhance economic growth, it is crucial to optimize capital investments, bolster export competitiveness through targeted policies, and invest in manufacturing innovation. These findings offer actionable insights for policymakers aiming to stimulate economic growth in Ghana.