Determinants of Foreign Direct Investment in Ghana: A Sectoral Analysis

Abstract

This study assesses the determinants of foreign direct investment (FDI) at sector level in Ghana taking into consideration the agriculture sector, services sector, and manufacturing sector. Using sector level data spanning 2000-2014, findings from the Ordinary Least Squares (OLS) regression analysis show that market size (measured by GDP) and labour cost have a significant impact on the inflows of agriculture sector FDI. The results also confirm trade openness and exchange rate to significantly influence services sector FDI. Unexpectedly, none of the variables are found to have significant effect on manufacturing sector FDI. The study recommends that the government should implement strategies that will enhance the growth of Ghana’s GDP, and deregulate the economy to allow more foreign investors into the country