The Role of Foreign Direct Investment on Ghana’s Economic Growth: A Durbin Watson Analysis

Abstract

Foreign Direct Investment (FDI) is an investment made by a firm or individual in one country into business interests located in another country. FDI is considered an important factor in developing an economy, as it raises the technological spillover and competition, and reinforces the production capabilities of the host country. FDI is normally taken or considered to be a major key to economic growth in most economies: developed and developing economies. The study examined how FDI impacted economic growth in Ghana from the period 1998 to 2017 with World Bank data time series data. The study revealed that there is a positive impact of FDI on economic growth in Ghana. The study further tested if the result is autocorrelated by applying the Durbin Watson test after the general method of moment regression had been done. The Durbin Watson test result confirms that, indeed, there is a positive correlation between FDI and economic growth.