The impact of foreign direct investment on Ghana's economic growth

The Impact of Foreign Direct Investment on economic growth has appeared to be a topic for discussion among researchers, academicians and policy makers. The Significance of this trend has gained much recognition as a result of the growing process of globalization and indispensable role of Multinational Corporation towards its attainment. Ghana, in the post-independence era experienced a decline and upward growth of economic growth as a result of inflows of FDI in the country. This study empirically investigated the impact and pattern of FDI on the economy of Ghana. Using time series data spanning from 1987 to 2017, Autoregressive Distributed Lagged model (ARDL) is employed for the study also Cointegration test, Error (ECM) Correction Model, the classical Granger Causality and Stability test were carried out through use of variables such as Economic Growth, Foreign Direct Investment, Government Expenditure, Inflation and Gross Domestic Savings. The study found that there is a significant positive impact of Foreign Direct Investment (FDI) and Government consumption expenditure on economic growth in both short and long run. The study further shows that, Gross Domestic savings significantly impacts negatively on economic growth in the long run while it significantly impacts pensively in the short run. Inflation was found to significantly impacts negatively on economic growth in the long run while it has insignificant impact in the short run. The results finally show that there is unidirectional causality between FDI and economic growth. That is FDI granger causes economic growth in Ghana. Given that the study revealed significant and positive impact of FDI on economic growth of Ghana, policies that seek to attract FDI inflow into the country should be looked at to further boost economic growth of Ghana.