Author(s)

Festus Ebo Turkson¹, Agyapomaa Gyeke-Dako², Emmanuel Bentum Amissah³

¹Department of Economics, School of Social Science, College of Humanities, University of Ghana, Accra, Ghana.
²Department of Finance, Business School, College of Humanities, University of Ghana, Accra, Ghana.
³Division of Economics, Nottingham Business School, College of Business Law & Social Sciences, Nottingham Trent University, Nottingham, UK.

Using the bound cointegration test, we examine how Foreign Direct Investment (FDI) influences Ghana’s growth through the financial environment. We use data from different sources including the World Development Indicators (WDI) of the World Bank, covering the period 1977-2010 to address this. Our key results are interesting. Specifically, our results show that, both in the short run and in the long run, FDI will have a better influence on growth in a sound financial environment. However, whiles the capital market is important to propel FDI’s influence on Ghana’s growth in the long-run; in the short run, developing the banking sector alone is not sufficient to achieve growth. Banking sector development needs FDI to influence growth. Our results justify enormous efforts made by Ghana to attract FDI and further suggest that the continuation of this policy will be beneficial to the economy given the relative progress made with regards to banking system and capital market development over the past two decades.

Foreign Direct Investment, Spillovers, Financial Environment, Banking System, Capital Markets

Turkson, F. , Gyeke-Dako, A. and Amissah, E. (2015) Foreign Direct Investment Spillovers and the Ghanaian Local Financial Environment. Modern Economy, 6, 1078-1089. doi: 10.4236/me.2015.610104.