Foreign Direct Investment in an Emerging Economy: Exploring the Determinants and Causal Linkages

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Foreign Direct Investment in an Emerging Economy: Exploring the Determinants and Causal Linkages

Journal Title: Academic Journal of Economic Studies - Year 2019, Vol 5, Issue 1

Abstract

The objective of the study was to examine the determinants of Foreign Direct Investment (FDI) from 1985 to 2015 in an emerging economy, Ghana. The study used a robust OLS regression and a Granger Causality Test to test for causal effects on a longitudinal data of thirty years. The study found, using a robust OLS regression model that, Natural Resource Endowment, Government expenditure, External debt and Infrastructure has significant predictive effects on FDI although the effect were more profound for natural resources and government expenditure. Using a granger causality approach, interest rate, natural Resource Endowment, Government expenditure, inflation, Infrastructure and international reserves were observed to granger cause FDI. The study recommends that policyholders and the government should also put in place measures that would maintain natural resources and spend on improving infrastructure and development as these attract foreign investments into the country.

Authors and Affiliations

Diana N-Peline Kombui, Richard Angelous Kotey

Keywords

FDI Granger causality Co-integration Error correction model

EP ID EP499926
DOI -
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