Bounds testing approach: an examination of foreign direct investment, trade, and growth relationships

Frimpong, Joseph Magnus and Oteng-Abayie, Eric Fosu (2006): Bounds testing approach: an examination of foreign direct investment, trade, and growth relationships. Forthcoming in: American Journal of Applied Sciences

Abstract

Purpose: This paper examines the long-run impact of foreign direct investment and trade on economic growth in Ghana. Methodology: 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. Findings: 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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Ghana; ARDL cointegration; unit roots; equilibrium-correction; FDI; Trade
• Subjects: F - International Economics > F1 - Trade > F14 - Country and Industry Studies of Trade; C - Mathematical and Quantitative Methods > C3 - Econometric Methods: Multiple; Simultaneous Equation Models; Multiple Variables; Endogenous Regressors > C32 - Time-Series Models; Dynamic Quantile Regressions; F - International Economics > F3 - International Finance > F39 - Other

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