Country Level Governance Indicators and Foreign Direct Investment in Ghana

Abstract

Foreign Direct Investment plays a critical role in the developmental agenda of every country. In recent times, one question that has become even more topical is why some countries are able to attract so much foreign capital into their countries while others do not. The aim of this study thus is to go beyond the traditionally known macro-economic factors to examine the relationship between Ghana’s country level governance indicators and foreign direct investment. The study used Two-stage Least Squares econometric techniques for a time series data from 1996 to 2016. Overall, the study found a significant positive relationship between all the six country level governance indicators and foreign direct investment. The implication is that governance indicators significantly increase foreign direct investment into Ghana. Based on the results, it is recommended that attention must be focused on control of corruption, government effectiveness, political stability, rule of law, regulatory requirement and voice and accountability since these variables also create significant opportunities to enhance foreign direct investment into Ghana and boost Ghana’s economic development.