Research Article Open Access

Bounds Testing Approach to Cointegration: An Examination of Foreign Direct Investment Trade and Growth Relationships

Oteng Abayie Eric Fosu1 and Frimpong Joseph Magnus1
  • 1 ,
American Journal of Applied Sciences
Volume 3 No. 11, 2006, 2079-2085

DOI: https://doi.org/10.3844/ajassp.2006.2079.2085

Submitted On: 8 September 2006 Published On: 30 November 2006

How to Cite: Fosu, O. A. E. & Magnus, F. J. (2006). Bounds Testing Approach to Cointegration: An Examination of Foreign Direct Investment Trade and Growth Relationships . American Journal of Applied Sciences, 3(11), 2079-2085. https://doi.org/10.3844/ajassp.2006.2079.2085

Abstract

This study examines the long-run impact of foreign direct investment and trade on economic growth in Ghana. Using an augmented aggregate production function (APF) growth model, we apply the bounds testing (ARDL) approach to cointegration which is more appropriate for estimation in small sample studies. The data span for the study is from 1970 to 2002. We found cointegration relations between growth and its determinants in the APF model. The results indicated the impact of FDI on growth to be negative which is consistent with other past studies. Trade however was found to have significant positive impact on growth.

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Keywords

  • Ghana
  • FDI
  • ARDL cointegration
  • unit roots
  • equilibrium-correction
  • trade