The Dynamism Between, Import, Foreign Direct Investment Inflow, Inflation and Covid-19 on Economic Growth: Evidence from Ghana
##plugins.themes.bootstrap3.article.sidebar##
##plugins.themes.bootstrap3.article.main##
https://orcid.org/0000-0002-0934-3996
Abstract
This research examines the long-term relationships between imports, inflation, and Foreign Direct Investment (FDI) influx in Ghana and their impact on productivity expansion. Using World Bank data from 1990 to 2019, the study applies statistical tests such as the ADF unit root test, Johansen cointegration test, vector error correction model, and Granger causality test. The results show that Ghana's economic growth is long-term dependent on imports and FDI influx. The Johansen tests reveal a long-term correlation between these factors, indicating a sustained relationship. Additionally, inflation negatively affects FDI, imports, and GDP. The Granger causality test identifies a short-run unidirectional effect between the variable. However, the vector error correction model (VECM) does not confirm a long-term relationship between imports and GDP as established by the Johansen test. The study suggests that FDI inflows are more effective than imports and inflation in the Ghanaian economy. Furthermore, the literature review highlights the significant impact of the COVID-19 pandemic on global trade, including agricultural exports to China. China’s early effective management of the pandemic and strategic actions have helped mitigate some of the negative effects on their total exports.
Downloads
##plugins.themes.bootstrap3.article.details##
Copyright (c) 2023 Alexander Amo Baffour, Evans Yeboah
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
References
Addo, E. O. (2019). An Assessment of the Impact of Foreign Direct Investment on Employment: The Case of Ghana’s Economy. International Journal of Economics and Financial Research , 5(6), 143-158.
Akyuz, Y. (2022). Global Economic Prospect. The Financial Crisis and the Global South.
Ali, G., & Li, Z. (2016). Analyzing the role of Imports in Economic Growth of Pakistan; Evidence from ARDL Bound Testing Approach. International Journal of Academic Research in Business and Social Sciences, 6(9), 19-37.
Alice, C. M., & Ebenezer, O. (2020). Causality Analysis on Export and Economic Growth Nexus in Ghana. Open Journal of Statistics, 10, 872-888.
Amoah, E., Nyarko, E., & Asare, K. (2015). FDI, INFLATION, EXCHANGE RATE AND GROWTH IN GHANA: EVIDENCE FROM CAUSALITY AND COINTEGRATED ANALYSIS. European Scientific Journal, 11(31), 294-304.
Andrei, D. M., & Andrei, C. L. (2015). Vector Error Correction Model in Explaining the Association of Some Macroeconomic Variables in Romania. Procedia Economics and Finance, 22, 568-576.
Antwi, O. G., James, A., & Peter, K. (2013, May). Foreign Direct Investment: A Journey To Economic Growth In Ghana - Empirical Evidence. International Business &Economics Research Journal, 12(5).
Arabi, M. K. (2014). The Effect of Financial Development on Economic Growth in Sudan: Evidence from VECM Model. International Journal of Economics and Finance, 6(11).
Argiro, M. (2003). Foreign Direct Investment and Economic Growth in the European Union. Journal of Economic Integration, 18(4), 689-707.
Asare, P., & Barfi, R. (2021). 32© 2021Conscientia Beam. All Rights Reserved.THE IMPACT OF COVID-19 PANDEMIC ON THE GLOBAL ECONOMY: EMPHASIS ON POVERTY ALLEVIATION AND ECONOMIC GROWTH. The Economics and Finance Letters, 8(1), 32-43.
Baba, I. (2013, Apirl). Foreign Direct Investment Inflows and Economic Growth in Ghana. International Journal of Economic Practices and Theories , 3(2).
CIOBANU, R., SOVA, R.-A., & POPA, A. (2020). The Impact of FDI over Economic Growth and how COVID-19 Crisis Can Impact the CEE Economies. CECCAR Business Review, 4, 64-72.
Dickey, W., & Fuller, W. (1979). Distribution of the estimators for autoregressive time series with a unit root. Journal of the American Statistical Association, 74, 427-431.
Donny, S. (2018). The Impact of Foreign Direct Investment on Economic Growth (a Causal Study in the United States). Jurnal Pendidikan Bisnis dan Ekonomi, 4(1).
Dr John, A.-A. (2005). What Has Been the Impact of Foreign Direct Investment in Ghana? The Institute of Economic Affairs, 1(9).
Dr.Soana, J., & Dr. Olta, Z. (2013). An Assessment of Demand for Imports through the VECM Model. Journal of Knowledge Management, Economics and Information Technology, III(6).
Eldin, M., Sabina, S., & Vesna, B.-H. (2013). The Impact of FDI on Economic Growth: Some Evidence from Southeast Europe. Emerging Markets Finance&Trade, 49, 5-20.
Emine, K., & Betul, A. T. (2012). Export and Economic Growth in the Case of the Manufacturing Industry: Panel Data Analysis of Developing Countries. International Journal of Economics and Financial Issues, 2(2), 201-215.
Europe, S. (2020). FDI Report Foreign Investment hit by COVID-19 Pandemic.
Fang, J., Collins, A., & Yao, S. (2021). On the global COVID-19 pandemic and China's FDI. Journal of Asian Economics, 74, 1-16.
Francis, G., Mary, O., & Jonatha, K. E. (2013). Foreign Direct Investment and Gross Domestic Product in Ghana. International Journal of Academic Research in Accounting, Finance and Management Sciences, 3(3), 256-265.
George, O.-A., James, A., Juanita, D. A., & Nana, T.-P. (2016, July). Evidence on the Co-Integration of the Determinants of Foreign Direct Investment in Ghana. Journal of Finance and Economics, 4(2), 23-45.
Granger, C. (1981). SOME PROPERTIES OF TIME SERIES DATA AND THEIR USE IN ECONOMETRIC MODEL SPECIFICATION. Journal of Econometrics, 16, 121-130.
Handoyo, R. (2020). Editorial: Impact of Covid 19 on Trade, Fdi, Real Exchange Rate and Era of Digitalization: Brief Review Global Economy During Pandemic. Journal of Developing Economies, 5(2), 86.
Havrlant, D., Darandary, A., Muhsen, A., & Havrlant, D. (2021). Early estimates of the impact of the COVID-19 pandemic on GDP : a case study of Saudi Arabia. Applied Economics, 53(12), 1317-1325.
Hieu, H. N. (2020). Impact of Foreign Direct Investment and International Trade on Economic Growth: Empirical Study in Vietnam. Journal of Asian Finance, Economics and Business, 7(3), 323-331.
Hobbs, S., Dimitrios, P., & Mostafa, E. A. (2021). Does Foreign Direct Investment and Trade Promote Economic Growth? Evidence from Albania. Economies, 9(1).
Justice, G., & Gloria, C. (2012). Determinants and Effects of Foreign Direct Investment in Ghana – Review of Literature. Developing Country Studies , 2(11).
Kartikasari, D. (2017). The Effect of Export, Import and Investment to Economic Growth of Riau Islands Indonesia. International Journal of Economics and Financial Issues, 7(4), 663-667.
Kusi, G. (2013). Regulatory Framework for Investing in Ghana. Accra: The Ghana Investment Promotion Centre.
Kwasi, B.-G., & Yao, L. (2016). The Linkage between China’s Foreign Direct Investment and Ghana’s Building and Construction Sector Performance. Eurasian Journal of Business and Economics, 9(18), 81-97.
Liming, H. (2014). Does and How does FDI Promote the Economic Growth? Evidence from Dynamic Panel Data of Prefecture City in China . IERI Procedia, 6, 57-62.
LIN, B., & ZHANG, Y. (2020). Impact of the COVID-19 pandemic on agricultural exports. Journal of Integrative Agriculture, 19(12), 2937-2945.
Majeed, A. (2014). Economic Growth, Exports and Imports in Pakistan:Granger Causality Analysis. The Journal of Business in Developing Nations, 13.
Manikandan, B., & Rajarathinam, A. (2019). Vector Error Correction Modeling For Indian GDP, Export and Import. Int J Recent Sci Res., 10(8), 34473-34478.
Marc, T. (2018). The role of trade in structural transformation. Journal of Development Economics, 130, 45-65.
Marinko, S., Justyna, F.-D., & Dajana, C. (2020). "Cointegration analysis and VECM of FDI, employment, export and GDP in Croatia (2002–2017) with particular reference to the global crisis and poor macroeconomic governance," Equilibrium. Quarterly Journal of Economics and Economic Policy, 15(4), 761-783.
Md, R. S., Hongzhong, F., Elyas, A., Md, I. H., & Mollah, A. I. (2019). Effects of export and technology on economic growth: Selected emerging Asian economies. Economic Research-Eknonoska Istrazivanja, 32(1), 2515-2531.
Mehar, M. (2021). Bridge financing during covid-19 pandemics: Nexus of FDI, external borrowing and fiscal policy. Transnational Corporations Review, 13(1), 109-124.
Mehdi, B. (2012). Foreign Direct Investment and Economic Growth: Evidence from Southern Asia. Atlantic Review of Economics, 2.
Michael, J. (2017). The Impact of Exports on Economic Growth: It’s the Market Form. The World Economy.
Nwosa, P. (2021). Oil price, exchange rate and stock market performance during the COVID-19 pandemic: implications for TNCs and FDI inflow in Nigeria. Transnational Corporations Review, 13(1), 125-137.
OECD. (2008, July). The Social Impact of Foreign Direct Investment. The OECD Policy Brief, 8.
Onyeagu, A. N. (2013). An Econometric Analysis of the Impact of Foreign Direct Investment on Economic Growth in Ghana: The Role of Human Capital Development. International Journal of Humanities and Social Science Invention, 2(8), 12-20.
Panos, A., & Apostolos, S. (2000). Output Growth and Variability of Export and Import Growth: International Evidence From Granger Causality Tests. The Developing Economies, 2, 141-63.
Panta, H., Mitra, L. D., & Dhruba, B. (2022). Exports and Imports-Led Growth: Evidence from a Small Developing Economy. Journal of Risk and Financial Management, 15(11), 2-14.
Pindiriri, C., Makochekanwa, A., & Ndudzo, S. (2014). Examining the long run relationship between import stcucture and economic growth in Zimbabwe. University of Zimbabwe Business Review, 2(2), 29-42.
Popovici, O. C., & Călin, A. C. (2016). Economic Growth,Foreign Investments andExports in Romania: AVECM Analysis. The Romanian Economic Journal.
Prince, A., & Victor, O. (2014). Foreign Direct Investment (FDI) Inflows into Ghana: Should the Focus Be on Infrastructure or Natural Resources? Short- Run and Long -Run Analyses . International Journal of Financial Research , 5(1).
Rakha, A., Hettiarachchi, H., Rady, D., Gaber, M. M., Rakha, E., & Abdelsamea, M. M. (2021). Predicting the Economic Impact of the COVID-19 Pandemic in the United Kingdom Using Time Series Mining.
Rati, R. (1985). Exports and Economic Growth: Some Additional Evidence. Economic Development and Cultural Change, 33(2), 415-425.
REDDY, K. K. (2020). Exports, imports and economic growth in India: An empirical analysis. Theoretical and Applied Economics, XXVII(4(625)), 323-330.
Rostam, M. (1984). Export Expansion and Economic Growth:Further Empirical Evidence*. Journal of Development Economics, 14, 241-250.
Ruba, A. S., Thikraiat, S., & Shatha, A.-K. (2014). The Causal Relationship between Exports and Economic Growth in Jordan. International Journal of Business and Social Science, 5(3).
Saswata, C., Nitya, N., & Bhawna, T. (2020). Impact of FDI on Economic Growth in South Asia: Does Nature of FDI Matters?*. Review of Market Integration, 12, 51-69.
Sharma, B. (2021). Covid-19 and recalibration of FDI regimes: convergence or divergence? Transnational Corporations Review, 13(1), 62-73.
Shiva, S. M., & Agapi, S. (2004). Impact of Foreign Direct Investment and Trade on Economic Growth: Evidence from Developing Countries. American Journal of Agricultural Economics, 86(3), 795-801.
Shujin, Z., & Xiaolan, F. (2013). Drivers of Export Upgrading. World Development, 51, 221-233.
Soava, G., Mehedintu, A., Sterpu, M., & Grecu, E. (2021). The Impact of the COVID-19 Pandemic on Electricity Consumption and Economic Growth in Romania.
Soo, K. G., Chung, Y. S., & Robert, M. (2017). Re-examining foreign direct investment, exports, and economic growth in asian economies using a bootstrap ARDL test for cointegration. Journal of Asian Economics, 51, 12-22.
Sunde, T. (2017). Foreign direct investment, exports and economic growth: ADRL and causality analysis for South Africa. Research in International Business and Finance, 41, 434-444.
Tanoe, V. (2021). Analysis of net trade, FDI and GDP growth using cointegration, VECM, Granger causality and a regression approach: A case study of Sub Saharan African region. International Journal of African Studies, 1(2), 10-20.
Tee, E., Larbi, F., & Johson, R. (2017). The Effect of Foreign Direct Investment (FDI) on the Ghanaian Economic Growth. Journal of Business and Economics Development, 2(5), 240-246.
Titus, I. Z., Shida, R. H., & Riza, R. (2020). Effects of Agricultural, Manufacturing, and Mineral Exports on Angola’s Economic Growth. energies.
Trang, T.-H. D., Duc, H. V., Anh, T. V., & Thang, C. N. (2019). Foreign Direct Investment and Economic Growth in the Short Run and Long Run: Empirical Evidence from Developing Countries. Journal of Risk and Financial Management.
Turan, S. (2002). Does Export Promotion Increase Economic Growth? Some Cross-Section Evidence. Development Policy Review, 20(3), 333-349.
Uğur, A. (2008). Import and Economic Growth in Turkey: Evidence from Multivariate VAR Analysis. EAST-WEST Journal of ECONOMICS AND BUSINESS, 1(2), 54-75.
UNCTAD. (2008). World Investment Report: Transnational Corporations and the Infrastructure Challenge. New York: United Nations Conference on Trade and Development.
Unctad. (2020). World Investment Report;International Production Beyond the Pandemic. Geneva: The United Nations Conference on Trade and Development.
Vaclav, A. (2014). Econometry II. Brno: Mendel University.
Vidya, C., & Prabheesh, K. (2020). Implications of COVID-19 Pandemic on the Global Trade Networks Implications of COVID-19 Pandemic on the Global Trade. Emerging Markets Finance and Trade, 56(10), 2408-2421.
Yeboah, E. (2018). Foreign Direct Investment in Ghana: The distribution among the Sectors and Regions. International Journal of Current Research, 10(01), 64292-64297.
Zhao, Y., Zhang, H., Ding, Y., & Tang, S. (2021). Implications of COVID-19 Pandemic on China’s Exports. Emerging Markets Finance and Trade, 57(6), 1716-1726.
Zou, X. (2018). VECM Model Analysis of Carbon Emissions, GDP, and International Crude Oil Prices. Discrete Dynamics in Nature and Society.