Does Foreign Direct Investment really affect Ghanaâs Economic Growth? (original) (raw)
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Does Foreign Direct Investment really affect Ghana’s Economic Growth?
In this paper, we investigate the linkage between FDI and economic growth using macro econometric model in the Ghanaian context. Structural shocks in an SVAR model were used to identify the contemporaneous and short run relationships effect s of these variables. The AB model restriction approach was used for the Identification and was compared to the Cholesky decomposition. We showed that, there exit a contemporaneous short run positive effects of FDI inflows on GDP growth but as the time horizon expands these effects tend to converge to the equilibrium, however FDI’s deteriorate domestic investment.
Foreign Direct Investment and Economic Growth in Ghana
Journal of Economics and Sustainable Development, 2012
The relationship between Foreign Direct Investment (FDI) an several decades. Policymakers in a large number of countries are engaged in creating all kinds of incentives to attract FDI, because it is assumed to positively affect economic growth. This paper investigates on economic growth in Ghana. The paper, test for the presence of the long run linear relationship between FDI inflows and Economic Growth (GDP) for Ghana. The study employs various econometrics tools such as Dickey Fuller (DF) and Augmented Dickey Fuller (ADF) tests, Vector Auto Regression (VAR) and Johansen Co-integration test on time series data from the first quarter of 2001 to the fourth quarter of 2010. The results reveal that a long run relationship exists between the variables, and growth in Ghana. Ghana should therefore continue to reform its economic and foreign policy to attract more investors which can help boost its economy.
The Effect of Foreign Direct Investment on Economic Growth in Ghana
This study examines the relationship between Foreign Direct Investment and Economic Growth as well as some selected macroeconomic variables such as inflation, gross fixed capital formation, trade openness and government spending in Ghana for the period 1983 to 2012 by means of time series analysis. This study employs Least Squares to examine the possible effects among the investigated series. The results suggest that, the impact of foreign direct investment on economic growth in Ghana is significantly positive. These findings will be useful for making appropriate policies by policy makers, investors and the government. Hence, there should be economic as well as foreign policy reforms aimed at attracting more investors to boost the Ghanaian economy.
The Effect of Foreign Direct Investment (FDI) on the Ghanaian Economic Growth
Foreign direct investment (FDI) has been an important source of economic growth for Ghana, bringing in capital investment, technology and management knowledge needed for economic growth. This paper studied the relationship between FDI and economic growth in Ghana for the period 1980-2012 using time series data. The data used in this study was mainly from a secondary source consisting of yearly observations for real GDP growth and foreign direct investment net inflows as a percent of GDP (FDI ratio). The data was sourced from the World Banks World Development Indicators database. The linear regression technique was applied using the yearly data to ascertain the effect of FDI on real GDP. The study establishes that FDI and other two control variables under consideration impact significantly on the economic development of Ghana. It was determined in the research that the increasing trend of FDI inflows has also significantly increased the GDP of the country. Therefore, the FDI inflows to Ghana is a key driver for economic growth and development and that it does not only boost capital formation but also enhances the quality of capital stock in the country.
2019
The issue of economic growth has become a great concern for many economies. The growth of economies has been attributed to many factors. To contribute to this subject, the study investigated the impact of foreign direct investment (FDI) on economic growth using evidence from Ghana. It went further to determine which FDI impacted sector has a significant effect on economic growth. Using time series data spanning from 1980 to 2012, Autoregressive Distributed Lagged model (ARDL) is employed for the study. The study revealed a positive and significant effect for both FDI and Government Spending on economic growth. Inflation and trade openness had a negative and significant effect on economic growth. On the second issue, FDI inflows to Agricultural and Manufacturing Sector had a positive and significant effect on economic growth in both short and long run. Service however showed a positive and significant effect in the short run but a negative and insignificant effect on economic growth in the long run. Even though FDI inflows to agricultural and manufacturing sector had a positive and significant effect on economic growth, inflows to manufacturing sector had the highest effect
Foreign Direct Investment (FDI) Inflows in Ghana: Sectorial Impact on Economic Growth (GDP)
International journal of science and research, 2019
Using a multiple regression analysis that includes FDI sector contribution and other macroeconomic variables, this paper explores the impact of FDI on economic growth in Ghana from sector perspective. From the analysis (the pair wise correlation), this study's findings indicate that FDI inflow into the tertiary sector, which involves Export trading, Service, Tourism, Liaison, General trading and Export trading, correlates and for that matter contributes to economic growth more than the secondary and the primary sectors. It is the case that for every unit increases in FDI inflow into the tertiary sector, GDP grows by as large about 85%. The second highest FDI sector contributor to GDP growth is the secondary sector, which comprises mainly the manufacturing and building & construction. This sector has about 67% multiplier effect on economic growth. Last but not least, FDI inflows into the primary sector also influence economic growth by about 57%. Both inflation and interest however has a deleterious impact on economic growth (GDP). As a matter of policy, this study recommends that policymakers and governments should put in much attention and resource in attracting FDI into the tertiary sector as well as reducing inflation and interest rate.
Multiple Regression and Structural Analysis of Foreign Direct Investment (FDI) in Ghana (1994-2010)
International journal of business and social research, 2014
Foreign Direct Investment (FDI) has been one of the topical issues in international economics, especially, from the past decade. Empirical research on FDI in developing countries, such as Ghana, has been relatively scarce even though there has been a lot of work on the trends in FDI. This study attempts to examine the trend of Foreign Direct Investment (FDI) in Ghana and its relationship with some selected economic indicators such as exchange rate, inflation, interest rates, Gross Domestic Product (GDP) as well as employment and the structural stability of FDIs with respect to the variables. Yearly data on FDI was used for the study spanning from 1994 to 2010. Results from the study indicated that FDI inflows into the country had experienced an increasing trend and undergone structural changes over the period under study. Furthermore, exchange rates and GDP growth played a significant role in attracting FDI into the country.
Influence of FDI on Economic Growth in Ghana
2019
ABSTRACT There have been growing discussions and debates as to the extent of influence FDI wields on GDP and how exchange rate and interest rate affect FDI inflows in an economy. The study was used to determine the extent of influence FDI has on GDP, and how interest rate and exchange rate affect FDI in Ghana. Ghana was selected based on the premise that it has solidly consolidated its democracy and strategically positioned and enjoy peace. The study employed E-view econometric model and (OLS) regression techniques to evaluate the influence of FDI on these variables using a time series data spanning from 1980 to 2014. The empirical data analysis revealed that FDI explained significant portion of variations in GDP in Ghana. The study recommended inter-alia that Ghana embark on massive infrastructure development, build institutional framework, improve on its macro-level indicators, trade openness and consolidate her democracy. Ghana could also devalue her currency in the long-run to attract product seeking FDI since the country has natural resources in abundance that are untapped. Keywords: GDP; FDI; Interest Rate; Exchange Rate; Growth Rate
2022
The World has witnessed a wave of financial globalization since 80's with drastic change in capital inflows notably in developing countries. Every country in the world emphasizes on economic growth & development as its top agenda & largely relies on investment as a key tool to achieve its set objectives. Though various supporting factors like domestic savings, foreign exchange reserve, trade surplus, favorable balance of payment, government's revenue are available to boost investment, most of the countries rely on foreign direct investment (FDI) for achieving its set targets. Even today, FDI has been treated as the safest mode by most of the developing countries. Majority of the investment policy changes in recent times by most of the Low developed countries or even by G20 members have been focused around opening the economy to attract more & more FDI. The investment policy changes are mainly directed towards liberalization, bilateral treaties, agreements & extending concessions etc. Prasad et.el (2003) found evidences that some developing countries witnessed high growth rates where as a number of countries experienced collapsing effect on their economy. Question arises to the real impact of FDI on growth & more pertinently "Does FDI become easier or more attractive merely by taking one or two steps towards liberalizing the economy?" Or there are other measures beyond the policy changes that may influence the inflow of FDI. Present study is an attempt to explore cause and effect relationship between FDI and chosen macroeconomic variables in Ghana. Various statistical tools like Granger's causality & VAR Tests & its analysis for the chosen variables indicate that there is no significant correlation between the independent variables, GDP growth rate, government expenditure and Inflation rate on the dependent variable viz the inflow of FDI. However, the results also suggest that the variables, BOP, import and export have a substantially positive impact on the inflow of FDI in Ghana. The study also suggests that the factors which have an influence on the rate of inflow of FDI are also inter-associated with each other with a positive impact. Barring imports, FDI has not influenced the chosen macroeconomic variables rather few of the macroeconomic variables chosen in study have made a significant impact on the inflow of FDI into Ghana. Keywords:-Foreign direct investment, Low developed countries, investment policy
2016
This study re-estimated the links between foreign direct investment (FDI) and economic growth by including the development of the domestic financial sector in Ghana. The simple dynamic ordinary least squares regression was used to analyze how financial sector development in Ghana contributes in attracting FDI to promote economic growth. It was found out that improvement in financial sector in Ghana leads to more inflows of foreign direct investment. The FDI with the interaction term and financial sector development has a significant positive impact on current real gross domestic product. This implied that FDI works through the domestic financial sector to affect the economic performance of the Ghanaian economy positively. Thus, the financial sector development is a key for FDI inflows to impact positively on the economic performance of the Ghanaian economy. The Granger causality test also showed that there is unidirectional causality from real gross domestic product to FDI, financia...