RELATIONSHIPS BETWEEN ECONOMIC GROWTH, FOREIGN DIRECT INVESTMENT AND INFLATION: ARDL MODELS APPROACH FOR THE CASE OF GHANA

Abstract

The study applies Autoregressive Distributed Lags models and the Toda and Yamamoto (1995) causality test to analyze the relationships as well as the causality properties among various pairs of Ghana’s inflow of Foreign Direct Investment (FDI), Inflation and Economic growth for the period1980 to 2017. The study finds that Inflation relates inversely with both Economic growth and inflows of Foreign Direct Investment. However, Ghana’s Economic growth and its inflows of FDI are positively related. Finally, the study finds a bidirectional causal effect between inflation and FDI. In addition, a unidirectional causal effect moving from Economic growth to Inflation was established and the causal effect is non-existent between Economic growth and inflow of FDI.

Keywords

• ardl,economic growth,causality test,fdi,ghana

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