Antecedents and short-run causal relationship between foreign direct investment and infrastructure development in Ghana

Abstract

This paper examines the antecedents and short-run causal relationships between foreign direct investment (FDI) and infrastructure development in Ghana. Using time series data spanning 1966-2015, we find that that FDI net inflows positively influences electricity consumption in Ghana; however, electricity consumption does not granger-cause FDI net inflows. The results further indicate that the electricity consumption shocks contribute 100 percent of the variance in the one-period-ahead forecast error for electricity consumption growth. An important implication of the findings is that, governments need to liberalize FDI policies for investments by multinational corporations since FDI contributes to infrastructure development.