Impact Of Foreign Direct Investment On Economic Growth In Ghana

ABSTRACT The issue of economic growth has become a great concern for many economies. The growth of economies has been attributed to many factors. To contribute to this subject, the study investigated the impact of foreign direct investment (FDI) on economic growth using evidence from Ghana. It went further to determine which FDI impacted sector has a significant effect on economic growth. Using time series data spanning from 1980 to 2012, Autoregressive Distributed Lagged model (ARDL) is employed for the study. The study revealed a positive and significant effect for both FDI and Government Spending on economic growth. Inflation and trade openness had a negative and significant effect on economic growth. On the second issue, FDI inflows to Agricultural and Manufacturing Sector had a positive and significant effect on economic growth in both short and long run. Service however showed a positive and significant effect in the short run but a negative and insignificant effect on economic growth in the long run. Even though FDI inflows to agricultural and manufacturing sector had a positive and significant effect on economic growth, inflows to manufacturing sector had the highest effect.