Economic Growth and Foreign Direct Investment: Cross-Country Assessment

The paper investigates the long run relationship and the nature of causality between foreign direct investment (FDI) and economic growth (GPD) for Ghana and Nigeria over the period of 1970-2011. Johansen cointegration model and Granger causality test were used to examine long run relationship and the nature of causality between FDI and GDP. The empirical results indicate stable long run equilibrium between FDI and GDP. The results indicate that it is GDP that causes FDI in the case of Ghana, where as there is no statistical evidence of causality between GDP and FDI in the case of Nigeria. Policy makers in these countries should incorporate these findings into their development policies. Future studies should investigate unit root in the presence of structural breaks.