The nexus between FDI inflows and economic development in Ghana: empirical analysis from ARDL model

This study examined FDI and economic progress in Ghana. Using annualised time series data obtained from the World Bank over a period from 1984 to 2018, an ARDL approach was implemented. Our findings show that external factors affirm positive impact on FDI attraction and economic development. Specifically, inflation and population have a long and short run substantial impact on attraction of FDI into Ghana. Similarly, at the micro level, financial expansion in the financial sector exerts long- and short-term substantial positive effect on FDI attraction. A 1% rise in FDI inflow and population would result in 234% and 200% economic expansion in the long run. Financial development in the private sector, however, exerts a considerable effect in the short run. This implies a weak resilience against shock for FDI in the private sector. Overall, our model confirms FDI-led economic expansion in Ghana in the long-run. To sustain this, recommendation is policymakers should reduce total control and involvement in the markets by allowing and empowering private sector expansion. Copyright © 2021 Inderscience Enterprises Ltd.