Bounds Testing Approach: An Examination of Foreign Direct Investment, Trade, and Growth Relationships

American Journal of Applied Sciences, Forthcoming

21 Pages Posted: 2 Oct 2006

See all articles by Joseph Frimpong Magnus

Joseph Frimpong Magnus

Kwame Nkrumah University of Science and Technology - KNUST School of Business

Eric F. Oteng-Abayie

Kwame Nkrumah University of Science and Technology (KNUST), Department of Economics, Students

Abstract

This paper examines the long-run impact of foreign direct investment and trade on economic growth in Ghana. Using an augmented aggregate production function (APF) growth model, we apply the bounds testing (ARDL) approach to cointegration which is more appropriate for estimation in small sample studies. The data span for the study is from 1970 to 2002. The results indicated the impact of FDI on growth to be negative which is consistent with other past studies. Trade however was found to have significant impact on growth.

Keywords: Ghana, ARDL cointegration, unit roots, equilibrium correction, FDI, Trade

JEL Classification: C32, F14, F21, F39, O11, O4

Suggested Citation

Frimpong Magnus, Joseph and Oteng-Abayie, Eric F., Bounds Testing Approach: An Examination of Foreign Direct Investment, Trade, and Growth Relationships. American Journal of Applied Sciences, Forthcoming, Available at SSRN: https://ssrn.com/abstract=927169

Joseph Frimpong Magnus

Kwame Nkrumah University of Science and Technology - KNUST School of Business ( email )

Faculty of Law
Faculty of Law
Kumasi, AK +233
Ghana

Eric F. Oteng-Abayie (Contact Author)

Kwame Nkrumah University of Science and Technology (KNUST), Department of Economics, Students ( email )

Ghana

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