Foreign Direct Investment, Trade Openness and Economic Growth in Ghana: An Empirical Investigation

Abstract

This paper investigates the long-run impact of foreign direct investment and trade openness on economic growth in Ghana (1970?2011) within the framework of the endogenous growth literature. Adopting the autoregressive distributed lag bounds testing approach to cointegration the results suggest that the interaction of foreign direct investment and exports has been crucial in fostering growth, thus validating the famous Bhagwati hypothesis. From a policy oriented point of view, the study recommends the channeling of foreign direct investment to export-oriented sectors and the promotion of export-led growth strategies in long-term development plans.