Adenutsi, Deodat E. (2007): Effects of trade openness and foreign direct investment on industrial performance in Ghana. Published in: Journal of Business Research , Vol. 2, No. 1&2 (2008): pp. 71-89.
Download (326kB) | Preview
This paper analyzes the macroeconomic implications of trade openness and foreign direct investment (FDI) on industrial performance in Ghana. The paper argues that in Ghana industrial performance is affected adversely by trade openness through a number of mechanisms including monetary policy, fiscal policy, and FDI. The methodological approach consists of analyzing a set of macroeconometric models using quarterly data for the period 1983(1)-2006(4) under general-to-specific parsimonious conditions. Unrestricted Cointegrating and Vector Error-Correction Models were estimated to examine the static and dynamic long-run effects as well as the short-run dynamics of the system and the speed of adjustment to the long-run equilibrium. The findings indicate that industrial performance is largely impeded by trade openness, high lending rate of commercial banks and, to a lesser extent, corporate tax. The main positive determinants of industrial performance are raw material availability, previous level of economic performance, industrial wage, and a moderate rate of inflation. It is, therefore, recommended that effective policies should be directed at stabilizing the macroeconomy to reduce the operational risks of banks which would reflect in lower lending rates, making the agricultural sector more vibrant for increased supply of raw materials to the industrial sector, and paying attractive industrial wages to workers. It is also recommended that policymakers should formulate and implement prudent policies that would appropriately harness domestic capital to finance industrial activities rather than over-relying on FDI (that does not have significant long-run impact on industrial performance in Ghana.
|Item Type:||MPRA Paper|
|Original Title:||Effects of trade openness and foreign direct investment on industrial performance in Ghana|
|English Title:||Effects of trade openness and foreign direct investment on industrial performance in Ghana|
|Keywords:||Globalization; Trade Openness; Foreign Direct Investment; Industrial Performance|
|Subjects:||F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance
L - Industrial Organization > L6 - Industry Studies: Manufacturing
F - International Economics > F1 - Trade > F14 - Empirical Studies of Trade
C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes
|Depositing User:||Deodat E. Adenutsi|
|Date Deposited:||05. Mar 2012 13:29|
|Last Modified:||12. Feb 2013 22:46|
Agarwal, J. (1980), “Determinants of Foreign Direct Investment: A Survey,” Welwirtschaftliches Archivs, 116: 739-773.
Akinkubge, O. (2003), Flow of Foreign Direct Investment to Hitherto Neglected Developing Countries, UNU-WIDER.
Bhalla, Ajit S. (1998), Globalization, Growth and Marginalization, London: Macmillan.
Barrios, S., H. Görg, and E. Strobl (2005), “Foreign Direct Investment, Competition and Industrial Development in the Host Country,” European Economic Review, 49: 1761-1784.
Buckley, P.J. and M. Casson (1976), The Future of the Multinational Enterprise, London: Macmillan.
Casson, M. (1982), ‘The Theory of Foreign Direct Investment,” in International Capital Movements, J. Black and J.H. Dunning (eds.), London: Macmillan: 22-57.
Crisp, B.F. and M.J. Kelly (1999), “The Socioeconomic Impacts of Structural Adjustment,” International Studies Quarterly, 43(3): 533-552.
Dean, Judith M., Seema Desai, and James Riedel (1994), “Trade Policy Reform in Developing Countries since 1985: A Review of the Evidence,” World Bank Discussion Paper, 267.
Demery, Lionel (1994), “Structural Adjustment: its Origins, Rationale and Achievements,” in From Adjustment to Development in Africa, Giovanni Cornia and Gerald Helleiner (eds.), New York: St. Martin’s Press.
Dormar, Evesey D. (1947), “Expansion and Employment,” American Economic Review, March: 34-55.
Dunning, J.H. (1982), “Explaining the International Direct Investment Position of Countries: Towards a Dynamic or Development Approach,” in International Capital Movements, J. Black and J.H. Dunning (eds.), London: Macmillan: 84-121.
Dunning, J.H. (1993), Multinational Enterprises and the Global Economy, Wokingham: Addison-Wesley.
Easterly, William (2005), “What did Structural Adjustment Adjust? The Association of Policies and Growth with Repeated IMF and World Bank Adjust Loans,” Journal of Development Economics, 76: 1-22.
Elbadawi, I.A. (1992), “Have World Bank-Supported Adjustment Programs Improved Economic Performance in Sub-Saharan Africa?” Policy Research Working Papers, Washington DC: Country Economics Department.
Elbadawi, I.A., D. Ghura and G. Uwujaren (1992), “Why Structural Adjustment Has Not Succeeded in Sub-Saharan Africa,” Policy Research Working Papers, Washington DC: Country Economics Department.
Gaynor, P.E. and C.R. Kirkpatrick (1994), Introduction to Time Series Modelling and Forecasting in Business and Economics, New York: McGraw-Hill.
Girma, Sourafel, Richard Kneller and Maura Pisu (2007), “Do Exporters Have Anything to Learn from Foreign Multinationals?” European Economic Review, 51(4): 981-998.
Granger, Clive W.J. (1969), “Investigating Causal Relations by Econometric Models and Cross Spectral Methods,” Econometrica, 35: 424-438.
Granger, Clive W.J. and P. Newbold (1974), “Spurious Regressions in Econometrics,” Journal of Econometrics, 2: 111-120.
Harrod, Roy F. (1948), Towards A Dynamic Analysis, London: Macmillan.
Helleiner, Gerald K. (1989), “Transnational Corporations and Direct Foreign Investment,” in Handbook of Development Economics, II, H.B. Chenery and T.N. Srinivasan (eds.), Elsevier, Amsterdam: 1442-1480.
Helleiner, Gerald K. (ed.) (1994), Trade Policy and Industrialization in Turbulent Times, London: Routledge.
Hoang, Nam and Jean Liao (2002), “Economic Effects of Globalization in Developing Countries: An Analysis of Vietnam and China,” EDGE Final Paper (Winter).
Hymer, Stephen H. (1976), The International Operation of National Firms: A Study of Direct Foreign Investment, Cambridge, MA: MIT Press.
International Labour Organisation [ILO] (1999), Progress Report on the Country Studies on the Social Impact of Globalization, GB.274/WP/SDL/2, Geneva.
Johansen, Soren (1988), “Statistical Analysis of Cointegrating Vectors”, Journal of Economic Dynamics and Control, 12: 231-254.
Johansen, Soren and Katarina Juselius (1990), “Maximum Likelihood Estimation and Inference on Cointegration with Applications to Demand for Money,” Oxford Bulletin of Economics and Statistics, 52: 169-210.
Killick, Tony (2000), “Fragile Still? The Structure of Ghana’s Economy 1960-94”, in Economic Reforms in Ghana: The Reality and Mirage, Ernest Aryeetey, Jane Harrigan, and Machiko Nissanke (eds.), London: James Currey: 51-67.
Kirkpatrick, C. H. and J. Maharaj (1992), “The Effects of Trade Liberalisation on Industrial Sector Productivity Performance in Developing Countries,” in Foreign Trade Reforms and Development Strategy, Chapter 4, Marc Fontain (ed.), London: Routledge.
Kirkpatrick, C.H. (1993), Trade Policy Reform in Developing Countries: The Lessons of Experience, DPPC, University of Bradford.
Kutan, Ali M. and Goran Vukšić (2007), “Foreign Direct Investment and Export Performance: Empirical Evidence,” Comparative Economic Studies, 49(3): 430-445.
Kyaw, Sandy (2003), “Foreign Direct Investment to Developing Countries in the Globalised World,” Paper presented at the DAS Conference, University of Strathclyde, Glasgow (September).
Lall, Sanjaya (1992), “Technological Capabilities and Industrialization,” World Development, 20(2): 165-186.
Lewis, Arthur W. (1954), “Economic Development with Unlimited Supplies of Labour,” Manchester School of Economic and Social Studies, 22(May): 139-191.
MacDougall, G.D.A. (1960), “The Benefits and Costs of Private Investment from Abroad: A Theoretical Approach,” Economic Record, 36: 13-35.
McGregor, Sue (2005), “Structural Adjustment Programmes and Human Well-Being,” International Journal of Consumer Studies, 29(3): 170-180.
Mosley, Paul J. and J. Toye (1991), Aid and Power: The Bank & Policy-Based Lending, Vol.1, New York: Routledge.
Mwilima, Ntwala (2003), “Foreign Direct Investment in Africa,” Social Observatory Pilot Final Report, Africa Labour Research Network, labour Resource and Research Institute, (September): 29-45.
Nishimizu, M. and S. Robinson (1986), “Productivity Growth in Manufacturing,” in Hollis Chenery, S. Robinson, and M. Syrquin (eds.), Industrialization and Growth: A Comparative Study, Oxford: Oxford University Press: 283-308.
Nishimizu, M. and J.M. Page, jr. (1991), “Trade Policy, Market Orientation, and Productivity Change in Industry,” in Trade Theory and Economic Reform, Jaime De Melo and Andre Sapir (eds.), Oxford: Basil Blackwell: 246-264.
Phillips, P.C.B. and P. Perron (1988), “Testing for a Unit Root in Time Series Regression”, Biometrica, 75: 335-346.
Ricardo, David (1817), On the Principles of Political Economy and Taxation, London: John Murray.
Rostow, Walt W. (1960), The Stages of Economic Growth: A Non-Communist Manifesto, London: Cambridge University Press.
Smith, Adam (1776), Wealth of Nations, New York: Random House.
Sindzingre, Alice (2005), “Explaining Threshold Effects of Globalisation on Poverty: An Institutional Perspective,” UNU-WIDER Research Paper, 2005/53.
Streeten, Paul P. (1993), “Markets and States: Against Marginalism,” World Development, 21(8, August): 1281-1298.
Todaro, Michael P. (1994), Economic Development, New York: Longman.
Tsie, B. (2000), “Globalization and Regional Integration in Southern Africa: Synergy or Rivalry”, Unpublished Paper presented at SARIPS Annual Colloquium in Harare, Zimbabwe.
Tybout, J.R. (1992), “Researching the Trade-Productivity Link: New Directions,” PRE Working Paper 638, Washington DC: World Bank.
UNCTAD (1999), Foreign Direct Investment in Africa: Performance and Potential, Geneva.
UNCTAD (2006), World Investment Report, Geneva.
Vos, R. (1994), Debt and Adjustment in the World Economy: Structural Asymmetries in North-South Interactions, London and New York: Macmillan and St. Martins’ Press.
World Bank (2002), Global Development Finance, Washington DC: World Bank.
World Economic Forum (1998), The African Competitiveness Report 1998. Geneva.