Ghana has received quite a substantial amount of FDI inflows (above the average for a non-producing oil country in Africa) but this has not contributed positively to growth because foreign investors concentrate on the mining sector to the neglect of the other sectors. The study exarnined the impact of foreign direct investment on growth from 1970-2006. The empirical findings from the error correction model show that FDI, capital investment, openness of the economy and population have a significant impact on GDP per capita. Further research can be undertaken on the impact of trade liberalisation on foreign direct investment in Ghana. In sum, there should be better policies to utilise foreign capital inflows. There should also be increase in capital investment and lastly, there is the need to insist on better trade agreements, policies to strategically positioning Ghana in the global market and promote export-led industrialisation.
The study also confirmed a unidirectional causality from economie growth to FDI inflows in Ghana. It however failed to confirm FDI led growth. The fact that the study failed to confirm FDI led growth in Ghana clearly shows that FDI is a necessary but not a sufficient condition to attain economie growth.
Further researchers should use disaggregated FDI data to find analyse the impact on growth in Ghana.
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ANNEXES
Annex 1: Working Data
Source: World Development Jndicators CD-Rom (2008); Unzted Natrons Statzstzcal Division-National Accounts (1970-2006};
Annex 2: Results of the Error Correction Model
Def2endent Variable: D{LGDPPC}
Method: Least Squares Date: 12/22/08 Time: 21:17 Sample (adjusted): 1971 2005
lncluded observations: 33 after adjustments
Coefficient Std. Error t-Statistic Pro b.
c 3.002217 1.179773 2.544742 0.0198
D(FDI} -0.051858 0.023085 -2.246418 0.0368 D(LGFCF) 0.254272 0.071357 3.563357 0.0021
D(LGEX) 0.040199 0.026904 1.494191 0.1515
D(GFC) -0.006324 0.011264 -0.561425 0.5811 D(OPNS) -0.470520 0.228961 -2.055019 0.0539
D(POP) 0.068000 0.098303 0.691741 0.4975
LGDPPC(-1) -0.690567 0.231346 -2.984990 0.0076 FDI(-1) -0.075724 0.028012 -2.703279 0.0141 LGFCF(-1) 0.208754 0.102316 2.040293 0.0555 LGEX(-1) 0.014722 0.021131 0.696716 0.4944 OPNS(-1) -0.437576 0.187438 -2.334512 0.0307
GFC(-1} 0.008107 0.009496 0.853738 0.4039
POP(-1) -0.080858 0.051048 -1.583962 0.1297
R-squared 0.752795 Mean dependent var 0.019639
Adjusted R-squared 0.583656 S.D. dependent var 0.131886 S.E. of regression 0.085099 Akaike info criterion -1.793586 Sum squared resid 0.137595 Schwarz criterion -1.158704 Log likelihood 43.59416 Hannan-Quinn criter. -1.579967 F-statistic 4.450725 Durbin-Watson stat 2.002783 Prob(F-statistic) 0.001724
Source: Estimation using Eviews 6
Annex 3: Johansen Cointegration Test
Date: 12/22/08 Time: 21:49 Sample (adjusted): 1972 2005
lncluded observations: 31 after adjustments Trend assumption: Linear deterministic trend Series: LGDPPC FDI LGFCF LGEX GFC OPNS POP Lags interval (in first differences): 1 to 1
Unrestricted Cointegration Rank Test {Trace)
Trace test indicates 2 cointegrating eqn(s) at the 0.05 level
*denotes rejection of the hypothesis at the 0.05 level
**MacKinnon-Haug-Michelis (1999) p-values
Unrestricted Cointegration Rank Test (Maximum Eigenvalue)
Hypothesized Max-Eigen 0.05
No. of CE(s) Eigenvalue Statistic Critical Value
None* 0.843367 57.46935 46.23142
Max-eigenvalue test indicates 1 cointegrating eqn(s) at the 0.05 level
*denotes rejection of the hypothesis at the 0.05 level
**MacKinnon-Haug-Michelis (1999) p-values
1 Cointegrating Equation(s): Log likelihood 10.35380
Normalized cointegrating coefficients (standard error in parentheses)
LGDPPC FDI LGFCF LGEX
1 Scaled explained SS 2.564162 Prob. Chi-Square(13)
Annex 7: ARCH Test
Annex 8: Breuscb,-Godfrey Seriai Correlation LM Test
Breusch-Godfrey Seriai Correlation LM Test:
F -statistic Obs*R-squared
-0.25é507 Prob. F(2,17) 0.973994 Prob. Chi-Squàre(2)
Annex 9: Ramsey Reset Test
Ramsey RESET Test:
F-statistic 1.329195 Prob. F(1,18) Log likelihood ratio 2.351081 Prob. Chi-Square(1)
Annex 10: Cusum and Cusum of Sqnares Tests
0.7752 0.6145
0.2640 0.1252
15~---. 1.6 . . - - - ,
10 --- 1.2
---
-5 --- 0.8
0.4 ---·
-5 ---- ---
---··--
---10
---1-CUSUM ---5% Significance 1 1-CUSUM of Squares ---5% Significance 1