Agricultural sector foreign direct investment and economic growth in Ghana

Dadson Awunyo-Vitor,Ruby Adjoa Sackey

doi:10.1186/s13731-018-0094-3

Abstract

The study seeks to establish the relationship between foreign direct investment to Ghana’s agriculture sector and economic growth with secondary data mainly sourced from the World Development Indicator. The techniques employed to analyse the data include descriptive statistic, unit root test, Granger causality test and error correction model (ECM). The study accepted a neutrality hypothesis between foreign direct investment to the Ghanaian agricultural sector and its covariates; trade openness, capital and government expenditure. The study also revealed positive and significant relationship between economic growth and foreign direct invest flow to the agricultural sector and volume of trade respectively. However, government expenditure exhibit negative but significant relationship with economic growth. The study contributes to economic development literature from an important but neglected research context with regards to agricultural development via foreign direct investment to support job creation and overall economic development with particular reference to Ghana. Thus, the study recommends that policy should focus on flexible trade policies to attract more foreign direct investment (FDI) inflows to Ghana’s agricultural sector to accelerate growth across board.

Highlights

In 1983, the government launched an economic recovery programme (ERP), which was geared towards resuscitating the economy by taking advantage of the opportunities offered by the new global environment of free trade, ideally utilising foreign direct investments (FDI)
With regards to causality between foreign direct investment in agriculture and government expenditure, the results reveal that FDI in agriculture does not cause economic growth nor does economic growth cause FDl in agriculture
The coefficient of the government expenditure variable is − 0.678, which mean a change in government expenditure would reduce the change in gross domestic product (GDP) by about 67%.the results show a positive significant relationship between economic growth and trade openness

Summary

Introduction

In 1983, the government launched an economic recovery programme (ERP), which was geared towards resuscitating the economy by taking advantage of the opportunities offered by the new global environment of free trade, ideally utilising FDI. The Ghana Investment Promotions Centre (GIPC) and the Divestiture Implementation Committee (DIC) are the two major independent bodies that are responsible for promoting investment activities in the country. These firms attract FDI through capital transfer from non-banking firms to foreign affiliates that had newly established operations in Ghana (Spar and Kou, 1995). The world today is a global economy in which countries continually look for partnerships internationally in order to sustain and keep the economies going These partnerships include foreign direct investments (FDI), international trade and export among others and are aided by information technology.

Objectives

Results

Conclusion