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Determinants of Foreign Direct Investment in Ghana: A Sectoral Analysis

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  • Yakubu, Ibrahim Nandom
  • Mikhail, Abdul Azeez

Abstract

This study assesses the determinants of foreign direct investment (FDI) at sector level in Ghana taking into consideration the agriculture sector, services sector, and manufacturing sector. Using sector level data spanning 2000-2014, findings from the Ordinary Least Squares (OLS) regression analysis show that market size (measured by GDP) and labour cost have a significant impact on the inflows of agriculture sector FDI. The results also confirm trade openness and exchange rate to significantly influence services sector FDI. Unexpectedly, none of the variables are found to have significant effect on manufacturing sector FDI. The study recommends that the government should implement strategies that will enhance the growth of Ghana’s GDP, and deregulate the economy to allow more foreign investors into the country.

Suggested Citation

  • Yakubu, Ibrahim Nandom & Mikhail, Abdul Azeez, 2019. "Determinants of Foreign Direct Investment in Ghana: A Sectoral Analysis," MPRA Paper 95121, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:95121
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    References listed on IDEAS

    as
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    2. Simon K. Harvey & Joshua Abor, 2009. "Determinants of inward foreign direct investment in the Ghanaian manufacturing sector," Global Business and Economics Review, Inderscience Enterprises Ltd, vol. 11(2), pages 180-197.
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    8. Fedderke, J.W. & Romm, A.T., 2006. "Growth impact and determinants of foreign direct investment into South Africa, 1956-2003," Economic Modelling, Elsevier, vol. 23(5), pages 738-760, September.
    9. Klaus E Meyer, 2001. "Institutions, Transaction Costs, and Entry Mode Choice in Eastern Europe," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 32(2), pages 357-367, June.
    10. Fabian Barthel & Matthias Busse & Robert Osei, 2011. "The Characteristics and Determinants of FDI in Ghana," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 23(3), pages 389-408, July.
    11. Erdal Demirhan & Mahmut Masca, 2008. "Determinants of foreign direct investment flows to developing countries: a cross-sectional analysis," Prague Economic Papers, Prague University of Economics and Business, vol. 2008(4), pages 356-369.
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    Cited by:

    1. Michael Kofi Hanson (M.Phil), 2024. "Effect of Foreign Direct Investment on Economic Growth: The Role of Natural Resources and Trade Openness in Ghana," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(3), pages 1347-1361, March.
    2. Ronald Ebenezer Essel, 2023. "Foreign direct investment, technological spillover, and total factor productivity growth in Ghana," SN Business & Economics, Springer, vol. 3(8), pages 1-34, August.

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    More about this item

    Keywords

    Determinants; Foreign Direct Investment; Ghana; OLS; Sector;
    All these keywords.

    JEL classification:

    • F1 - International Economics - - Trade
    • F18 - International Economics - - Trade - - - Trade and Environment
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles

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