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A General Equilibrium Analysis of the Impact of Inward FDI on Ghana: The Role of Complementary Policies

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  • Arbenser, Lawrence

Abstract

The need for external capital (FDI) inflow to finance the current account deficit of developing countries cannot be over-emphasized. Foreign direct investment takes predominance over other types of capital inflow into developing countries. How would an increase in FDI and a reduction in import tariff levels in isolation affect household welfare and other macroeconomic indicators? How would the concurrent application of the two enhance the expected impact? This paper explores the above questions by using a Computable General Equilibrium (CGE) model for Ghana, implemented in the General Algebraic Modeling System (GAMS) to carry out specific counterfactual simulations. This paper concludes that the primary benefit of an increase in FDI inflow for a developing economy is the increase in current consumption. It also establishes that policies which ensure increase in FDI inflow and reduce tariff levels are complementary policies that enhance household welfare. It also emphasizes that the two policies will have different impact on macroeconomic indicators, inter alia exchange rage, export, import and trade deficit.

Suggested Citation

  • Arbenser, Lawrence, 2004. "A General Equilibrium Analysis of the Impact of Inward FDI on Ghana: The Role of Complementary Policies," Working Paper Series 18829, Humboldt University Berlin, Department of Agricultural Economics.
    • Handle: RePEc:ags:huiawp:18829
    DOI: 10.22004/ag.econ.18829
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    References listed on IDEAS

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    Cited by:

    1. von Witzke, Harald & Kirschke, Dieter & Lotze-Campen, Hermann & Noleppa, Steffen, 2005. "The Economics of Alternative Strategies for the Reduction of Food-borne Diseases in Developing Countries: The Case of Diarrhea in Rwanda," Working Paper Series 18830, Humboldt University Berlin, Department of Agricultural Economics.
    2. Badri, Balghis & Knuth, Hardine, 2008. "The Engendered Spaces in the Village at the Edge of the Capital: A Case Study of Al Gharaza/Sudan," Working Paper Series 43095, Humboldt University Berlin, Department of Agricultural Economics.
    3. Mark Horridge & Glyn Wittwer, 2008. "Creating and managing an impossibly large CGE database that is up-to-date," Centre of Policy Studies/IMPACT Centre Working Papers g-175, Victoria University, Centre of Policy Studies/IMPACT Centre.
    4. Patrick GEORGES & Marcel MERETTE & Yazid DISSOU, 2008. "Liberalizing Foreign Direct Investment Restrictions in Canada: A Multi-Country Computable General Equilibrium Analysis," EcoMod2008 23800043, EcoMod.
    5. AfDB AfDB, 2006. "Working Paper 86 - A Review of Ex - ante Poverty Impact Assessments of Macroeconomic Policies in Cameroon and Ghana," Working Paper Series 2220, African Development Bank.
    6. Grethe, Harald, 2005. "Turkey’s accession to the EU: what will the Common Agricultural Policy cost?," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 54(02), pages 1-10.
    7. Nolte, Stephan, 2006. "The application of spatial models in the analysis of bilateral trade flows: An alternative to the Armington approach for the world sugar market," Working Paper Series 10288, Humboldt University Berlin, Department of Agricultural Economics.
    8. AfDB AfDB, 2006. "Working Paper 86 - A Review of Ex - ante Poverty Impact Assessments of Macroeconomic Policies in Cameroon and Ghana," Working Paper Series 2300, African Development Bank.
    9. Valeria Ferreira & Miguel Ángel Almazán-Gómez & Victor Nechifor & Emanuele Ferrari, 2022. "The role of the agricultural sector in Ghanaian development: a multiregional SAM-based analysis," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 11(1), pages 1-27, December.

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