The Effect of Foreign Direct Investment (FDI) on the Ghanaian Economic Growth
Journal of Business and Economic Development
Volume 2, Issue 4, November 2017, Pages: 240-246
Received: May 20, 2017; Accepted: Jul. 31, 2017; Published: Aug. 16, 2017
Views 1707      Downloads 116
Authors
Tee Evans, Department of Business Administration, Regentropfen College of Applied Sciences, Kansoe-Bolgatanga, Ghana
Larbi Frank, Department of Business Administration, Regentropfen College of Applied Sciences, Kansoe-Bolgatanga, Ghana
Johnson Rebecca, Department of Business Administration, Regentropfen College of Applied Sciences, Kansoe-Bolgatanga, Ghana
Article Tools
Follow on us
Abstract
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.
Keywords
Economic Growth, Foreign Direct Investment, GDP, Ghana
To cite this article
Tee Evans, Larbi Frank, Johnson Rebecca, The Effect of Foreign Direct Investment (FDI) on the Ghanaian Economic Growth, Journal of Business and Economic Development. Vol. 2, No. 4, 2017, pp. 240-246. doi: 10.11648/j.jbed.20170204.16
Copyright
Copyright © 2017 Authors retain the copyright of this article.
This article is an open access article distributed under the Creative Commons Attribution License (http://creativecommons.org/licenses/by/4.0/) which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.
References
[1]
Stulz, "On the Effects of Barriers to International Investment," The Journal of Finance, vol. 36, pp. 923-934., 1981.
[2]
G. Rodan, “Singapore: economic diversification and social divisions,’’ in Rodan, G., Hewison, K. and Robison, R. (Eds.), The Political Economy of Southeast Asia: an Introduction, South Melbourne.: Oxford University Press, 1997.
[3]
Lipsey, "Home and Host Country Effects of FDI," NBER Working Paper 9293, 2002.
[4]
M. Feldstein, "Aspects of Global Economic Integration: Outlook for the Future," NBER Working Paper 7899, 2000.
[5]
P. M. Romer, "Increasing Returns and Long Run Growth," Journal of Political Economy, vol. 94, no. 5, pp. 1002-1037, 1986.
[6]
L. P. King, "Foreign Direct Investment and Transition," European Journal of Sociology, vol. 41, pp. 189-224, 2000.
[7]
L. P. King and S. Aleksandra, “The State-Led Transition to Liberal Capitalism: Neoliberal, Organizational, World Systems, and Social Structural Explanations of Poland’s Economic Success,” American Journal of Sociology, vol. 112, p. 751–801, 2006.
[8]
M. Carkovic and R. Levine, "Does Foreign Direct Investment Accelerate Economic Growth?" University of Minnesota, Working Paper., Minnesota, 2006.
[9]
L. Alfaro, A. Chanda, S. Sayek and S. Kalemli – Ozam, "FDI and Economic Growth: The Role of Local Financial Markets," in ECON WPA, Houston., 2002.
[10]
R. M. Solow, "Technical Change and the Aggregate production Function," Review of Economics and Statistics (the MIT Press), vol. 39, no. 3, pp. 312-320., 1956.
[11]
G. Mankiw, D. Romer and N. Weil, "A Contribution to the Empirics of Economic Growth," Quarterly Journal of Economics, vol. 107, pp. 407-437, 1992.
[12]
H. Bos, M. Sanders and C. Secchi, Private Foreign Investment in Developing Countries: A Quantitative Study on Macro-Economic Effects, D. Riedel Publishing., 1974.
[13]
E. Borensztein, J. de Gregorio and L. W. Lee, "How does foreign investment affect economic growth?," Journal of International Economics, vol. 45, no. 1, pp. 115-35., 1998.
[14]
E. Asiedu, "On the determinants of foreign direct investment to developing countries: is Africa different?" World Development, vol. 30, pp. 107-19, 2002.
[15]
N. Muhammad and A. Ammar, "Fdi and Economic Growth" A Study from Pakistan," American Research Journal of Business and Management, vol. 1, no. 2, pp. 44-46, 2015.
[16]
A. S. Wajid, "Contribution of FDI in Economic Growth," International Journal of Economics, Commerce and Management, vol. v, no. 2, pp. 284-311, 2017.
[17]
C. Chakraborty and P. Basu, "Foreign Direct Investment and Growth in India: A Cointegration Approach," Applied economics, vol. 34, no. 9, pp. 1061-1073, 2002.
[18]
K. H. Zhang, "Does foreign direct investment promote economic growth? Evidence from East Asia and Latin America," Contemporary Economic Policy, vol. 19, no. 2, pp. 175-185, 2001.
ADDRESS
Science Publishing Group
1 Rockefeller Plaza,
10th and 11th Floors,
New York, NY 10020
U.S.A.
Tel: (001)347-983-5186