TITLE:
Foreign Direct Investment Spillovers and the Ghanaian Local Financial Environment
AUTHORS:
Festus Ebo Turkson, Agyapomaa Gyeke-Dako, Emmanuel Bentum Amissah
KEYWORDS:
Foreign Direct Investment, Spillovers, Financial Environment, Banking System, Capital Markets
JOURNAL NAME:
Modern Economy,
Vol.6 No.10,
October
27,
2015
ABSTRACT: Using the bound cointegration test, we examine how Foreign Direct Investment
(FDI) influences Ghana’s growth through the financial environment. We use data from
different sources including the World Development Indicators (WDI) of the World
Bank, covering the period 1977-2010 to address this. Our key results are interesting.
Specifically, our results show that, both in the short run and in the long run,
FDI will have a better influence on growth in a sound financial environment. However,
whiles the capital market is important to propel FDI’s influence on Ghana’s growth
in the long-run; in the short run, developing the banking sector alone is not sufficient
to achieve growth. Banking sector development needs FDI to influence growth. Our
results justify enormous efforts made by Ghana to attract FDI and further suggest
that the continuation of this policy will be beneficial to the economy given the
relative progress made with regards to banking system and capital market development
over the past two decades.