Foreign Direct Investment Inflows and Economic Growth in Ghana

Authors

  • Baba Insah School of Business, Wa Polytechnic, Wa. Upper West Region, Ghana.

Keywords:

Dynamic ordinary least squares, error correction, leads and lags, inflation

Abstract

There exists mixed empirical evidence on the size of gains from Foreign Direct Investment (FDI) inflows for the economies of different countries. The paper thus investigated the relationship between economic growth and FDI inflows a dynamic framework. A study of this sort would inform policy on the role of lagged, coincident and leading effects of FDI on economic growth. An Engle-Granger two-step methodology for error correction was employed. The major empirical and methodological contribution of this study is the use of Dynamic Ordinary Least Squares (DOLS) technique. Dynamic OLS becomes better than OLS by coping with small sample sources of bias. The elasticity of economic growth with respect to FDI had a positive sign and also significant at the 1% level. However, the effect of a three (3) year lag of FDI on economic growth had a negative sign and significant at the 5% level. Policy makers should thus not concentrate on current macroeconomic inflows of FDI but consider effects of past FDI inflows on current levels of economic growth.

Author Biography

Baba Insah, School of Business, Wa Polytechnic, Wa. Upper West Region, Ghana.

Wa Polytechnic, Lecturer

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Published

2013-04-01

How to Cite

Insah, B. (2013). Foreign Direct Investment Inflows and Economic Growth in Ghana. International Journal of Economic Practices and Theories, 3(2), 115-121. Retrieved from http://ijept.eu/index.php/ijept/article/view/Foreign_Direct_Investment_Inflows_and_Economic_Growth_in_Ghana

Issue

Vol. 3 No. 2 (2013)

Section

Articles

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