Macroeconomic dynamics and forestry sustainability in Ghana: evidence from time series analysis

Purpose This study examined how macroeconomic variables, such as inflation, relate to forest sustainability in Ghana. It focuses on three issues: inflation's effect on private investment, how investment affects forest resources, and how inflation influences forest outcomes. The research also analyses their dynamic interactions to understand the macroeconomic impacts on the environmental results. Design/methodology/approach The study uses annual data for Ghana from 1990 to 2024 to examine long-run relationships using Johansen cointegration. Fully Modified Ordinary Least Squares (FMOLS) and Dynamic Ordinary Least Squares (DOLS) are used to estimate effects, correcting for endogeneity and serial correlation. A Vector Error Correction Model (VECM) captures short-run dynamics and reversion to equilibrium, while impulse-response and variance-decomposition analyses examine forestry responses to inflation and private investment shocks. Findings The findings confirm stable long-run relationships among private investment, inflation, and forest resources. Real gross domestic product (GDP) significantly promotes private investment, while inflation is positively associated with investment, reflecting broader macroeconomic conditions rather than a direct causal effect. Private investment significantly reduces forest resources across FMOLS and DOLS estimates. Inflation exhibits mixed effects on forest resources, implying indirect transmission through economic conditions. The VECM results show rapid adjustment of private investment to equilibrium, and variance decomposition identifies investment as the main driver of forest resource fluctuations. Research limitations/implications The analysis relies on aggregated national data, which may not capture informal investment activity or regional variations forest resources. Practical implications Policies promoting private investment require stronger environmental regulation and sustainable land-use planning to protect forest resources while supporting long-term economic growth. Originality/value The study provides an integrated empirical framework linking macroeconomic conditions, investment behaviour, and environmental outcomes in Ghana.