Dynamism Between, Import, Foreign Direct Investment Inflow, Inflation and Covid-19 on Economic Growth: Evidence from Ghana

Abstract

This research examines the long-term relationships between imports, inflation, and Foreign Direct Investment (FDI) influx in Ghana and their impact on productivity expansion. Using World Bank data from 1990 to 2019, the study applies statistical tests such as the ADF unit root test, Johansen cointegration test, vector error correction model, and Granger causality test. The results show that Ghana's economic growth is long-term dependent on imports and FDI influx. The Johansen tests reveal a long-term correlation between these factors, indicating a sustained relationship. Additionally, inflation negatively affects FDI, imports, and GDP. The Granger causality test identifies a short-run unidirectional effect between the variable. However, the vector error correction model (VECM) does not confirm a long-term relationship between imports and GDP as established by the Johansen test. The study suggests that FDI inflows are more effective than imports and inflation in the Ghanaian economy. Furthermore, the literature review highlights the significant impact of the COVID-19 pandemic on global trade, including agricultural exports to China. China’s early effective management of the pandemic and strategic actions have helped mitigate some of the negative effects on their total exports.