Short run causal relationship between foreign direct investment (FDI) and infrastructure development

Abstract

Purpose Foreign direct investment (FDI) flows for infrastructure development have grown in volume to become more widely dispersed among home (outward investor) and host (recipient) countries. This paper aims to explore the short-run causal relationship between FDI and infrastructure development in the developing country of Ghana. Design/methodology/approach A two-stage least squares estimation method was adopted where FDI was endogenized, and all variables were in constant prices. Stationarity tests were performed on the annualized log difference of variables using augmented Dickey–Fuller test (ADF). Findings Results reveal a positive and significant relationship between FDI and infrastructure but a negative and significant relationship between FDI and GDP and FDI and openness. GDP growth also has a long-run negative relationship with FDI inflows. Originality/value The paper’s contribution to knowledge is two-fold. First, it examines the short run effect of FDI upon the Ghanaian economy and how market shocks to FDI and infrastructure development can be ameliorated. Second, it illustrates that government policymakers should prioritize development that requires FDI and ensure that the local market is not excessively open to foreign exploitation. Future work is required to further investigate international capital flow and its impact upon other developing nations.

CO2 Emissions, Legal Strength & Environmental Sustainability Policies; And FDI Nexus In Sub-Saharan Africa

“…The infrastructure of the host country measured by the degree of access to electricity also has a positive and significant effect on the attractiveness of FDI. This is consistent with the results found in (Ajayi et al, 2004;Kaur et al, 2016;Owusu-Manu et al, 2019). These conclude that solid infrastructure is a key factor in attracting FDI.…”

“…In general, foreign investors look for attractive regions in several senses, characterized by their technological and technological efficiency in terms of their export process. According to (Callaway et al, 2002;Kaur et al, 2016;Owusu-Manu et al, 2019), countries that meet this criterion form "core countries. "…”

The Different Impacts of Airports on the Ecological Environment under Distinct Institutional Contexts

“…Transportation infrastructure, represented by airport investment plans, boosts financial development [1,2], which offers a direct and effective means of stimulating investment [3], increasing employment [4] and promoting economic growth [5,6]. However, the negative impacts of infrastructural development, including loss of land resources [7,8], pollution emissions [9] and destruction of ecological environments [10], are often ignored.…”

The Role of Economic Infrastructure and Trade Openness in Attracting Foreign Direct Investment in Developing Countries

“…A reputable 20 percent of global domestic product and a prodigious 70 percent of global trade are generated by Multinational Corporations (MNCs), now some 54,000 parent firms and some 450,000 foreign subsidiaries increasingly influencing the size and nature of cross-border transactions (Owusu-Manu et al, 2019). Overwhelmingly, MNCs participate in global trade.…”