Effects of foreign direct investment on government revenue in Ghana

Abstract

The study assessed the effects of foreign direct investment on government revenue in Ghana. Foreign direct investment, Per Capita GDP, Education and Urbanisation were used as independent variables whereas tax revenue was taken as dependent variable. Augmented Dickey-Fuller, Phillips-Perron, Ng-Perron and Zivot-Andrews unit root tests were applied to find the level of stationarity in the time series. Autoregressive Distributed Lag and its Error Correction Model were applied to find long run and short run relationships. The study found the existence of long run and short run relationships in the model. FDI, Per Capita GDP and Level of Education had positive and significant effect on tax revenue so FDI, Per Capita GDP and Level of Education are raising tax revenue to Government of Ghana. Urbanisation also had positive but insignificant effect on tax revenue in Ghana.