“The determinants of private sector investment in Ghana”
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Date
2008-10-24
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Abstract
This study presents an empirical assessment of the factors that have stimulated or deterred private sector investment in Ghana over the period 1970-2002. Employing modem time series econometric techniques such as unit root and Granger causality tests, cointegration and error correction techniques within an ARDL framework, which has been found to yield more robust estimates, the study revealed intriguing results. While majority of the results confirmed theoretical propositions, others contradicted the postulates of theory.
The results suggest that private investment is determined in the short-run by public investment, inflation, real interest rate, openness, real exchange rate and a regime of constitutional rule, while real output, inflation, external debt, real interest rate, openness and real exchange rate significantly influenced private investment response in the long- run.
Among numerous policy recommendations, the study suggested policies which aimed at sustained increases in productive public investment in infrastructure and export-led growth strategies. Furthermore, judicious use of HIPC funds in areas that enhance private sector development and fiscal discipline should be vigorously pursued. Finally, political and institutional reform complemented by a credible macroeconomic environment which enhances private sector investment growth is strongly recommended.
Description
A thesis submitted to the Department of Economics in partial fulfilment of the requirements for the award of Master of Arts degree in Economics, 2008