Foreign Direct Investment (FDI) Inflows into Ghana: Should the Focus Be on Infrastructure or Natural Resources? Short- Run and Long -Run Analyses

Acheampong, Prince; Osei, Victor

doi:10.5430/ijfr.v5n1p42

Cited by 14 publications

(20 citation statements)

References 10 publications

(5 reference statements)

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“…Empirical evidence bears out this hypothesized positive relationship between natural resource endowment and FDI. The relationship has been documented at the aggregate level in the context of multi-country panel data studies (Asiedu, 2006(Asiedu, , 2013Ezeoha and Cattaneo, 2012) and country case studies as in the case of Ghana (Acheampong and Osei, 2014), as well as at the disaggregated company and sector levels (Aleksynska and Havrylchyk, 2013). The evidence suggests that countries with a high endowment in natural resources also attract high FDI inflows.…”

Section: Natural Resources and Fdimentioning

confidence: 98%

Capital flight, foreign direct investment and natural resources in Africa

Ndikumana

Sarr

2019

Resources Policy

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This paper provides theoretical and empirical insights into the puzzling simultaneous rise in foreign direct investment inflows in Africa and capital flight from the continent over the past decades. Indeed, paradoxically, even as African countries have become more attractive to foreign private capital, they have continued to experience capital exodus in the context of improved economic performance, especially since the turn of the century. This paper explores three questions. First, does foreign direct investment fuel capital flight as has been established in the case of external borrowing? In other words, is there an FDI-fueled capital flight phenomenon akin to debt-fueled capital flight? Second, is natural resource endowment a possible channel for the capital flight-FDI link, given that resource-rich countries tend to be both preferred destinations of FDI and prominent sources of capital flight? Third, does the quality of institutions mitigate the impact of natural resources on capital flight? The paper develops a theoretical model that conceptualizes these linkages and sets the stage for an econometric investigation of these questions. The results from econometric analysis based on a sample of 30 African countries over the period 1970-2015 show that FDI flows are positively related to capital flight, suggesting a possible FDI-fueled capital flight phenomenon. However, there is no evidence for an FDI overhang effect; past stock of FDI has no impact on capital flight. High natural resource rents are associated with high capital flight and the quality of institutions does not mitigate this link. The paper offers some policy insights derived from the empirical results.

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Section: Natural Resources and Fdimentioning

confidence: 98%

Capital flight, foreign direct investment and natural resources in Africa

Ndikumana

Sarr

2019

Resources Policy

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“…Empirical evidence bears out this hypothesized positive relationship between natural resources and FDI. The relationship has been documented at the aggregate level in the context of multi-country panel data studies (Asiedu, 2006(Asiedu, , 2013Ezeoha and Cattaneo, 2012) and country case studies (as in the case of Ghana (Acheampong and Osei, 2014)), as well as at the disaggregated company and sector levels (Aleksynska and Havrylchyk, 2013). The evidence suggests that countries with high natural resources also attract high FDI inflows.…”

Section: Natural Resources and Fdimentioning

confidence: 99%

Capital flight and foreign direct investment in Africa: An investigation of the role of natural resource endowment

Ndikumana¹,

Sarr²

2016

WIDER Working Paper

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This paper aims to provide theoretical and empirical insights into the puzzling simultaneous rise in foreign direct investment (FDI) inflows in Africa and capital flight from the continent over the past decades. It specifically explores two questions: Is FDI a potential driver of capital flight? And, is natural resource endowment a possible channel for the capital flight-FDI link? The econometric analysis is based on 32 African countries over the period 1970-2013 using dynamic panel data estimation methods. Three important findings emerge from the analysis. First, while there is no robust evidence that capital flight is fuelled by annual FDI inflows (there is no equivalent to debt-fuelled capital flight), there is a positive relationship between the stock of FDI and capital flight. Second, natural resource endowment is directly related positively to capital flight and resource endowment is associated with a stronger FDI stock-capital flight link, especially in the case of oil. Third, high-quality institutions somehow weaken the link between FDI and capital flight, although they do not completely eliminate the relationship. The results point to potential gains from improvements in institutional quality in African countries through minimizing the contribution of FDI and natural resources to capital flight.

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“…They reported a negative association between political risk levels and FDI inflow. This negative association between political risk and FDI inflows was supported by Acheampong, P., & Osei, V. (2014); Burger, M., et al, (2013); Solomon &Ruiz (2012); Kim, H. (2010); and Asiedu (2006) and despite the argument that political risk could minimize FDI inflow, some authors have shown that political risks play a key role in the decision of the firm to invest abroad (Esew & Yaroson, 2014;Samimi & Rezanejad, 2013;Bitzenis, 2007;Block, 2000;Levis, 1979;Brewer, 1983). For example, Li and Resnick (2003) fail to show a significant impact of political instability on the FDI inflows.…”

Section: Ps and Fdi Inflowsmentioning

confidence: 97%

Impact of Foreign Investment in the Yemen's Economic Growth: The Country Political Stability as a Main Issue

Musibah¹,

Shahzad²,

Fadzil³

2015

ASS

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This paper investigates the moderating role of political stability in the Foreign Direct Investment (FDI) inflows into Yemen over the last two decades. Augmented Dickey Fuller (ADF) test was employed to check the stationary of the data. Following the ADF test, the standard and hierarchal regression approaches were used for the analysis. The standard regression results show that the GDP growth rate has significant negative effects on FDI inflows into Yemen while exchange rate, inflation rate, balance of payment, and gross national income have no effect on the FDI inflow in the country. However, when the moderating variable, political stability is used together with other variables such as exchange rate, inflation rate, balance of payment and gross national income, the results of hierarchical regression indicate that these variables are important determinants of FDI inflows into the country. Therefore, the results suggest that political stability is critical for the future growth of Yemen economy.

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Foreign Direct Investment (FDI) Inflows into Ghana: Should the Focus Be on Infrastructure or Natural Resources? Short- Run and Long -Run Analyses

Cited by 14 publications

References 10 publications

Capital flight, foreign direct investment and natural resources in Africa

Capital flight, foreign direct investment and natural resources in Africa

Capital flight and foreign direct investment in Africa: An investigation of the role of natural resource endowment

Impact of Foreign Investment in the Yemen's Economic Growth: The Country Political Stability as a Main Issue

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