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

Yıl 2019, Cilt: 1 Sayı: 2, 7 - 23, 31.07.2019

Orhan Coban , Abdul-razak Yussıf

Öz

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.

Anahtar Kelimeler

ardl, economic growth, causality test, fdi, ghana

Kaynakça

• Risso, Adrián W. and Edgar J., Sánchez Carrera (2009). “Inflation and Mexican economic growth: long-run relation and threshold effects”. Journal of Financial Economic Policy 1(3): 246–263.
• Antwi, Samuel, Ebenezer Fiifi Emire Atta. Mills, Gifty Atta Mills and Xicang Zhao (2013). “Impact of foreign direct investment on economic growth: Empirical evidence from Ghana”. International Journal of Academic Research in Accounting, Finance and Management Sciences 3(1): 18–25.
• Asafu-Adjaye, John (2005). What has been the impact of foreign direct investment in Ghana? Institute of Economic Affairs, No. 1.
• Olaiya, Sam A., Ifeakachukwu Nwosa Philip and Amassoma Ditimi (2011). “A trivariate causality test among economic growth, government expenditure and inflation rate: Evidence from Nigeria”. The Journal of World Economic Review 6(2): 189–199.
• Balasubramanyam, Vudayagiri N., Mohammed A. Salisu and David Sapsford (1996). “Foreign direct investment and growth in EP and IS countries”. The Economic Journal 109(434): 92-105.
• Borensztein, Eduardo R., De Gregorio José R. and Jongwha Lee (1998). “How does foreign direct investment affect economic growth?”. Journal of International Economics 45(1): 115–135.
• Bruno, Michael and William Easterly (1998). “Inflation crises and long-run growth”. Journal of Monetary Economics 41(1): 3–26.
• De Mello, Luiz R. (1999). “Foreign direct investment-led growth: evidence from time series and panel data”. Oxford economic papers, 51(1): 133-151.
• Dickey, David A. and Wayne A. Fuller (1979). “Distribution of the Estimators for Autoregressive Time Series with a Unit Root”. Journal of the American Statistical Association 74(366): 427-431.
• Djokoto, Justice G. (2012). “The effect of investment promotion on foreign direct investment inflow into Ghana”. International Business Research 5(3): 46-57.
• Dowling, John M. and Ulrich Hiemenz (1982). “Aid, savings and growth in the Asian region, Economic office report series 3”. Manila: Asian Development Bank.
• Er, Perihan H., Can T. Tugcu, and Orhan Coban (2014). “Investigating the Link Between Savings, Inflation and Economic Growth: an ARDL Analysis for the Case of Turkey”. Journal of Economics, Finance and Accounting–JEFA 1(2): 81-90.
• Erbaykal Erman, and Aydin H. Okuyan (2008). “Does inflation depress economic growth? Evidence from Turkey”. International Research Journal of Finance and Economics 13(17): 40-48.
• Esso, Jacques L. (2010). “Long-run relationship and causality between foreign direct investment and growth: Evidence from ten African countries”. International Journal of Economics and Finance 2(2): 168-177.
• Frimpong, Joseph M., and Eric F. Oteng-Abayie (2006). “Bivariate causality analysis between FDI inflows and economic growth in Ghana”. International Research Journal of Finance and Economics 15: 103-112.
• Ghosh, Atish R. and Steven Phillips (1998). “Warning: Inflation may be harmful to your growth”. Staff Papers 45(4): 672–710.
• Granger, Clive W.J. (1988): “Some recent development in a concept of causality”. Journal of econometrics 39(1-2): 199-211.
• Grossman, Gene M., and Elhanan Helpman (1991). “Trade, knowledge spillovers, and growth”. European economic review 35(2-3): 517-526.
• Gul, Sajid, Muhammad Sajid, Farman Afzal, Muhammad B. Khan and Sumra L. Mughal (2012): “Factors Influencing Foreign Direct Investment: The Case of Pakistan”. Economics and Finance Review, 2(2): 21-25.
• Hansen, Henrik and John Rand (2006). “On the causal links between FDI and growth in developing countries”. World Economy 29(1): 21–41.
• Herzer, Dierk, Stephan Klasen and Felicitas D. Nowak-Lehmann (2008). “In search of FDI-led growth in developing countries: The way forward”. Economic Modelling 25(5): 793-810.
• Hossain, Akhtar (2005). “The Granger-causality between money growth, inflation, currency devaluation and economic growth in Indonesia: 1954- 2002”. International Journal of Applied Econometrics and Quantitative Studies 2(3): 45–68.
• Hossain, Elias M., Bikash C. Ghosh and Khairul M. Islam, (2012). “Inflation and economic growth in Bangladesh”. Journal of Arts, Science & Commerce 3(4-2): 85-92.
• Johansen, Soren and Katarina Juselius (1990). “Maximum likelihood estimation and inference on co-integration —with applications to the demand for money”. Oxford Bulletin of Economics and Statistics 52(2): 169-210.
• Khan, Mohsin S. and Abdelhak S. Senhadji (2001). Threshold Effects in the Relationship between Inflation and Growth, IMF Staff Papers 48(1): 1-21.
• MacKinnon, James G. (1996). “Numerical distribution functions for unit root and co-integration tests”. Journal of Applied Econometrics 11(6): 601-618.
• Marbuah, George (2010). “On the inflation-growth nexus: testing for optimal inflation for Ghana”. Journal of Monetary and Economic Integration 11(2): 71–72.
• Narayan, Paresh K., and Seema Narayan (2006). “Savings behaviour in Fiji: an empirical assessment using the ARDL approach to co-integration ”. International Journal of Social Economics 33(7): 468-480.
• Nazir, Shumaila, Nadia Sarwar and Sami Ullah (2012). “Impact of capital inflows on domestic inflation: a case study of Pakistan”. Journal of Asian Development Studies 1(1): 4–12.
• Pesaran, M. Hashem, Yongcheol Shin and Richard J. Smith (2001). “Bounds testing approaches to the analysis of level relationships”. Journal of Applied Econometrics 16(3): 289-326.
• Phillips, Peter C.B., and Pierre Perron (1988). “Testing for a unit root in time series regression”. Biometrika 75(2): 335-346.
• Quartey, Peter (2010). “Price stability and the growth-maximizing rate of inflation for Ghana”. Modern Economy 1(3): 180–194.
• Ray, Debraj (1998). Development Economics. Princeton, NJ: Princeton University Press.
• Romer, Paul M. (1990). “Endogenous technological change.” Journal of Political Economy 98(5, Part 2): 71-102.
• Sarel, Michael (1996). “Nonlinear effects of inflation on economic growth”. Staff Papers 43(1): 199–215.
• Solow, Robert M. (1956). “A contribution to the theory of economic growth”. The Quarterly Journal of Economics 70(1): 65-94.
• Stockman, Alan C. (1981). “Anticipated inflation and the capital stock in a cash in-advance economy”. Journal of Monetary Economics 8(3): 387-393.
• Tobin, James (1965). “Money and economic growth”. Econometrica: Journal of the Econometric Society 33(4): 671-684.
• Toda, Hiro Y. and Taku Yamamoto (1995). “Statistical inference in vector autoregressions with possibly integrated processes”. Journal of Econometrics 66(1-2): 225-250.
• Udoh, Edet J. and Festus O. Egwaikhide, (2008). “Exchange rate volatility, inflation uncertainty and foreign direct investment in Nigeria”. Botswana Journal of Economics 5(7): 14–31.
• Zhang, Kevin H. (2001). “How does foreign direct investment affect economic growth in China?”. Economics of Transition 9(3): 679–693.