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Bivariate causality analysis between FDI inflows and economic growth in Ghana

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  • Frimpong, Joseph Magnus
  • Oteng-Abayie, Eric Fosu

Abstract

The main objective for this paper is to study the causal link between FDI and GDP growth for Ghana for the pre- and post-SAP periods. We also study the direction of causality between the two variables, based on the more robust Toda-Yamamoto (1995) Granger no-causality test which allows the Granger test in an integrated system. Annual time-series data covering the period 1970-2002 was used. The study finds no causality between FDI and growth for the total sample period and the pre-SAP period. FDI however caused GDP growth during the post-SAP period.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 351.

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Date of creation: 26 Aug 2006
Date of revision: 09 Oct 2006
Handle: RePEc:pra:mprapa:351

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Keywords: Ghana; FDI; seemingly unrelated regression; Granger causality; cointegration;

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References

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  1. Judith A. Giles & Sadaf Mirza, 1999. "Some Pretesting Issues on Testing for Granger Noncausality," Econometrics Working Papers 9914, Department of Economics, University of Victoria.
  2. Mosconi, Rocco & Giannini, Carlo, 1992. "Non-causality in Cointegrated Systems: Representation Estimation and Testing," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 54(3), pages 399-417, August.
  3. Toda, Hiro Y. & Yamamoto, Taku, 1995. "Statistical inference in vector autoregressions with possibly integrated processes," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 225-250.
  4. Asiedu, Elizabeth, 2002. "On the Determinants of Foreign Direct Investment to Developing Countries: Is Africa Different?," World Development, Elsevier, vol. 30(1), pages 107-119, January.
  5. David E. A. Giles & Lindsay Tedds & Gugsa Werkneh, 1999. "The Canadian Underground and Measured Economies: Granger Causality Results," Econometrics Working Papers 9907, Department of Economics, University of Victoria.
  6. Chowdhury, Abdur R. & Mavrotas, George, 2005. "FDI and Growth: A Causal Relationship," Working Paper Series RP2005/25, World Institute for Development Economic Research (UNU-WIDER).
  7. Sims, Christopher A, 1972. "Money, Income, and Causality," American Economic Review, American Economic Association, vol. 62(4), pages 540-52, September.
  8. Dufour, J.M. & Renault, E., 1995. "Short-Run and Long-Rub Causality in Time Series: Theory," Cahiers de recherche 9538, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
  9. Johansen, Soren & Juselius, Katarina, 1990. "Maximum Likelihood Estimation and Inference on Cointegration--With Applications to the Demand for Money," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 52(2), pages 169-210, May.
  10. Granger, C. W. J., 1988. "Some recent development in a concept of causality," Journal of Econometrics, Elsevier, vol. 39(1-2), pages 199-211.
  11. Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July.
  12. Yamada, Hiroshi & Toda, Hiro Y., 1998. "Inference in possibly integrated vector autoregressive models: some finite sample evidence," Journal of Econometrics, Elsevier, vol. 86(1), pages 55-95, June.
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Citations

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Cited by:
  1. Abdullahi Ahmed & Enjiang Cheng & George Messinis, 2011. "The role of exports, FDI and imports in development: evidence from Sub-Saharan African countries," Applied Economics, Taylor & Francis Journals, vol. 43(26), pages 3719-3731.
  2. Ioan Alin Nistor & Maria Ciupac-Ulici & Ioana Radu, 2013. "Testing the Granger Causality between the Dynamics of the Romanian Mutual Fund Market and the Economy," Finante - provocarile viitorului (Finance - Challenges of the Future), University of Craiova, Faculty of Economics and Business Administration, vol. 1(15), pages 48-59, December.
  3. Alberto Jaramillo & Sebastián Gómez Cardona, 2010. "¿Es la coyuntura económica un resultado de las expectativas empresariales? Análisis de la EOIC 1990-2008," DOCUMENTOS DE TRABAJO CIEF 011110, UNIVERSIDAD EAFIT.
  4. repec:cmj:networ:y:2013:i:1:p:103-114 is not listed on IDEAS
  5. Carike Claassen & Elsabé Loots & Henri Bezuidenhout, 2011. "Chinese Foreign Direct Investment in Africa," Working Papers 261, Economic Research Southern Africa.
  6. Samuel Antwi & Ebenezer Fiifi Emire Atta Mills & Xicang Zhao, 2013. "Impact of Macroeconomic Factors on Economic Growth in Ghana: A Cointegration Analysis," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 3(1), pages 35-45, January.
  7. Nabila Asghar & Samia Nasreen & Hafeez ur Rehman, 2012. "Relationship between FDI and Economic Growth in Selected Asian Countries: A Panel Data Analysis," Review of Economics & Finance, Better Advances Press, Canada, vol. 2, pages 84-96, February.
  8. Frimpong, Joseph Magnus & Oteng-Abayie, Eric Fosu, 2006. "Bounds testing approach: an examination of foreign direct investment, trade, and growth relationships," MPRA Paper 352, University Library of Munich, Germany, revised 09 Oct 2006.
  9. Chakraborty, Chandana & Nunnenkamp, Peter, 2008. "Economic Reforms, FDI, and Economic Growth in India: A Sector Level Analysis," World Development, Elsevier, vol. 36(7), pages 1192-1212, July.
  10. Samuel Antwi & Ebenezer Fiifi Emire Atta Mills & Gifty Atta Mills & 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, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 3(1), pages 18-25, January.
  11. Farrokh Nourzad, 2008. "Openness and the Efficiency of FDI: A Panel Stochastic Production Frontier Study," International Advances in Economic Research, Springer, vol. 14(1), pages 25-35, February.

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