potential for narrow productivity gains, e.g. by promoting foreign direct investment in retail. But, as Rodrik (2018: 16) put it, “achieving productivity gains along the entire retail sector is extremely difficult in view of the heterogeneity of organizational forms and the range of prerequisites across different segments.” Looking into the drivers of overall growth, we especially found financial development and infrastructure to be key drivers of Ghana’s growth performance since 2000. This is consistent with the picture that extended periods of growth above the 2 percent historical average call for improvements in structural fundamentals and with the two best-performing economies in our comparative analysis, Korea and Malaysia, that also both saw considerable improvements in those variables.

Going forward, our analysis underscores the relation between short-run and long-run policies. In the short run, fixing the macroeconomic stabilization framework should be a priority given the recent boom-bust episode, our result that the most recent episode of growth (since 2010) was not justified by economic fundamentals, and large policy gaps compared to peer countries in this dimension. The need for further improvements of structural fundamentals to enjoy continued substantial growth rates in the longer run is supported by our benchmark exercise (and consistent with firm-level surveys) showing substantial gaps in some variables capturing structural factors, foremost financial development and aspects of infrastructure. The latter will also be important to foster regional and global trade integration. Improving access to finance, together with other reforms such as removing firms’ business constraints and broadening skill levels, may support the development of new firms in less isolated and more productive areas than the traditional wholesale and retail trade sector, boosting growth-enhancing structural change.

Without prudent stabilization policies, necessary investments in many of those growth fundamentals are hard to finance. Additionally, there could be an important macro relation between the exchange rate regime and structural transformation, as moving away from the current overvaluation would also make the tradeable sector internationally more competitive and thus potentially offer job prospects in above-average productivity sectors where the marginal product of labor is not declining as much as in insulated service sectors. In our view, moving towards a consistent macro policy framework that aligns longer-term development aspirations with short-run challenges is hence of utmost importance for Ghana going forward and a challenge for Sub-Saharan African countries more broadly (see Calderon and Boreux, 2016). Moller and Wacker (2017) have documented for the case of Ethiopia that growth reduction through moderate heterodox macro policies may be overcompensated if they finance investment in areas with higher growth return. For the case of Ghana, we have documented the limits to such policies, as the costs of the post-2010 fiscal boom were relatively large while macroeconomic policies created few structural improvements that lifted the economy’s longterm output potential.

linkages should remain the mainstay of Ghanaian development. Also note that a modern wholesale and retail sector that is well-integrated with the rest of the economy is not ad odds with fast growth and structural transformation, as the example of Thailand shows (where the sector ranges at average economy-wide productivity).

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