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The determinants of foreign direct investment in Ghana
Eghan, Jonathan Ronald Muller
ABSTRACT Foreign direct investment and its determinants have been extensively examined by many scholars in hopes to analyze and identify how these determinants impact FDI and in some cases vice versa. The determinants of FDI used in this study include GDP growth and inflation in Ghana. The objective of this paper is to investigate the dynamic relationship between FDI, GDP growth and inflation and this was achieved with the help of the vector autoregressive model which helped us explain the granger causation relationship between the variables. Econometric methodologies such as Augmented Dickey-Fuller test, Johansen cointegration test, Granger causality test among others were used to support the objective of the VAR model. The study covered the period from 1980 to 2015 and employed secondary data which was gathered from the World Bank. The results from the VAR model proved that GDP growth and inflation have no linear causation relationship with FDI in Ghana within the analyzed period. These results were ascertained in the condition that within the studied period, the current values of FDI were not determined by the past values of GDP growth and inflation. The study recommended that the Government must create an enabling environment for foreign investors. Also, the Government must showcase the investment potentials of Ghana globally through technological spillovers among others.

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