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Does the Form Matter? Foreign Capital Inflows and Economic Growth

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  • Frank Adusah-Poku
  • William Bekoe

Abstract

Empirically, results from time series and cross country studies have identified foreign capital inflows to play a pivotal role in the growth process of host countries. The goal of this article is to examine the impact of three of the four forms of foreign capital inflows (which include foreign aid, foreign direct investment and personal remittances) on economic growth in Ghana. The study employs the ARDL Bounds testing approach to cointegration on an annual time series data for Ghana from 1980-2012. The results of the study indicate that all the three forms of foreign capital inflows have positive and significant impacts on economic growth both in the short and long run. The results also show that of all the three forms of foreign capital inflows, foreign aid is the main driver of economic growth in Ghana both in the short and long run. The study recommends the design and implementation of good fiscal, monetary and trade policies to complement the flow foreign aid to the country for the realization of its full impact on growth.

Suggested Citation

  • Frank Adusah-Poku & William Bekoe, 2018. "Does the Form Matter? Foreign Capital Inflows and Economic Growth," Journal of Economics and Econometrics, Economics and Econometrics Society, vol. 61(3), pages 39-74.
    • Handle: RePEc:eei:journl:v:61:y:2018:i:3:p:39-74
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    JEL classification:

    • C1 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • N17 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Africa; Oceania

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