Foreign Direct Investment in Ghana: The Role of Infrastructural Development and Natural Resources

Abstract

AbstractThis paper examines the role of infrastructural development and natural resources on FDI inflows in Ghana. We examine the empirical relations using the Prais–Winsten regression estimation procedure which is meant to overcome autocorrelation and heteroscedasticity in the error terms in the model, often for regressions applied to series. The data was obtained from World Development Indicators (WDI) spanning from 1975 to 2014. Our findings suggest that infrastructural development and natural resources are drivers of FDI inflows in Ghana. The other variables that significantly influence FDI inflows in Ghana include the lending interest rate, market size and GDP growth rate. The policy implications of this study is that, while Ghana seeks to expand its infrastructure and natural resources to enhance FDI inflows and economic growth, this must be done in tandem with creating an enabling environment to ensure macroeconomic stability.