Bounds Testing Approach to Cointegration: An Examination of Foreign Direct Investment Trade and Growth Relationships
Oteng Abayie Eric Fosu and Frimpong Joseph Magnus
DOI : 10.3844/ajassp.2006.2079.2085
American Journal of Applied Sciences
Volume 3, Issue 11
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.
© 2006 Oteng Abayie Eric Fosu and Frimpong Joseph Magnus. This is an open access article distributed under the terms of the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited.