ABSTRACTIn spite of the lack of any concrete empirical study establishing the impact of inflation, foreign direct investment, and public debt on Ghana’s economy, the Bank of Ghana and IMF have provided this study with data from 1990 to 2019. The government of Ghana through its different leaders has over …
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ABSTRACTIn spite of the lack of any concrete empirical study establishing the impact of inflation, foreign direct investment, and public debt on Ghana’s economy, the Bank of Ghana and IMF have provided this study with data from 1990 to 2019. The government of Ghana through its different leaders has over the years tried to bring in foreign investors to boost the economy while fighting to reduce inflation in other to have stable growth. Public debt among others has often been bedeviled by incorrect macroeconomic forecasts. This study used time series multivariate regression analysis to demonstrate the effect of FDI, public debt, and inflation performance on Ghana’s economy, measured by Gross domestic product (GDP). The study adopts an econometric model. Short-run dynamics were established using different ARDL bounds tests to cointegrate to examine the existence of long-run relationships among the variables. The results showed the existence of no cointegration. As a result, only short-run relationships were explored. The study finds that GDP growth relates positively with FDI and negatively with inflation and public debt both in the short run. Furthermore, bidirectional causality was established between GDP growth and FDI, while, a unidirectional causal link was found between GDP and FDI to inflation. There was no causal relationship between inflation to GDP. Finally, a unidirectional causality was discovered running from GDP to inflation and subsequently public debt. All variables were statistically insignificant. The study recommended that high public debt and volatile inflation must be controlled so as to decrease inflation and increase FDI, and GDP on Ghana’s economy.
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