The Effect of Investment Promotion on Foreign Direct Investment Inflow into Ghana

Abstract

The paper investigated the effect of investment promotion (IP) on foreign direct investment flow (FDI) into Ghana. Cointegration among the variables was established using auto regressive distributed lag (ARDL) models in the presence of a mix of I (0) and I (1) variables. The control variables, inflation and trade openness were statistically significant in the short run. Whilst inflation exerted a negative effect on FDI inflow; trade openness positively induced FDI inflow. GDP per capita and exchange rate did not statistically significantly influence FDI inflow in the short run. In respect of the key variable GIPC, in the short run, there was a positive but statistically insignificant effect on FDI inflow. The estimated long-run ARDL model showed that macroeconomic variables such as inflation, GDP and trade openness determined FDI inflow into Ghana. Notwithstanding the positive relationship between establishment of IP agency (GIPC) and FDI inflow, this relationship was statistically insignificant. Greater efforts at macroeconomic management specifically, promotion of external trade, increasing GDP and reducing inflation holds more promise to attracting FDI into Ghana. GIPC should be maintained to provide a supportive role when the foreign investors arrive in Ghana.

The Investment development path theory: Evidence from developing countries’ agricultural sector

“…In an earlier study with other colleagues, we found that agricultural FDI explained agricultural GDP (Djokoto et al, 2022). Other studies made similar findings ( (Djokoto, 2013;Gunasekera et al, 2015) whilst the reverse is also true (Djokoto, 2012;Kassem and Awad, 2019;Lv et al, 2010), hence there can be an endogeneity problem. Rather than anticipate and model accordingly, we proceeded to test for endogeneity (Table 5).…”

Risks and Foreign Direct Investment Inflows: Evidence from Yemen

“…Brzozowski (2006) found that the uncertainty and volatility of exchange rate influence the investment decision negatively in emerging markets and transition countries. In contrast to the findings reported thus far, a group of studies found that the exchange rate has a statistically insignificant effect on FDI inflows (Amal, Tomio & Raboch 2010;Bissoon 2012;Djokoto 2012;De Vita & Abbott 2007;Yang, Groenewold & Tcha 2000). Anyanwu (2012) and Srinivasan (2011) also showed an insignificant relationship between exchange rate and FDI inflows in Africa.…”

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From local to global, and return: Geographical indications and FDI in Europe

“…Trade linkages (Jones et al, 2020) and regional market potential (Krisztin & Piribauer, 2023) have also been recognized as relevant drivers for FDI. Investors, especially in the agri-food sector, usually target foreign countries/ regions with pre-existing well-established trade linkages (Conconi et al, 2016;Djokoto, 2012;Santos et al, 2021).…”