Private Investment, FDI and Trade Openness in Ghana

Abstract

Various policy analysts contend that, the private sector is the engine of economic growth and development. However, to ensure rise in private investment, in addition to other measures, governments are normally encouraged to liberalize their economies as well as institute measures that would encourage the inflow of foreign direct investment (FDI). Therefore, given that previous studies on Ghana focused on how FDI and Trade openness affect economic growth with less attention on their impact on Private Investment, this study filled the gap in the literature by investigating how trade openness and FDI affect private investment in Ghana. By employing time series data on Ghana from 1975 to 2014 and the Ordinary Least Square Regression Technique with further robustness tests, the study found that trade openness and real GDP have positive effects on private investment in Ghana. However, FDI and public investment were insignificant. Therefore, liberalising the Ghanaian economy could be an effective means of boosting private investment which is seen as the engine of economic growth and development.