Determining the optimal threshold of foreign direct investment for sustainable improvement in Ghana’s trade balance
Purpose – The main purpose of this study is to evaluate the threshold impact of foreign direct investment (FDI) on Ghana’s trade balance. Design/methodology/approach – The study used annual time-series data, spanning 1980–2022. The study employed the autoregressive distributed lag (ARDL) models, err...
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| Format: | Article |
| Language: | English |
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Emerald Publishing
2025-04-01
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| Series: | International Trade, Politics and Development |
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| Online Access: | https://www.emerald.com/insight/content/doi/10.1108/ITPD-04-2024-0017/full/pdf |
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| _version_ | 1849762435226927104 |
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| author | David Aboagye Danquah Charles Barnor |
| author_facet | David Aboagye Danquah Charles Barnor |
| author_sort | David Aboagye Danquah |
| collection | DOAJ |
| description | Purpose – The main purpose of this study is to evaluate the threshold impact of foreign direct investment (FDI) on Ghana’s trade balance. Design/methodology/approach – The study used annual time-series data, spanning 1980–2022. The study employed the autoregressive distributed lag (ARDL) models, error correction models and smooth threshold regression techniques to establish the relationship between FDI and trade balance. Findings – The result of the study shows a positive and significant effect of FDI on trade balance in the short and long run on the Ghanaian economy. The study further revealed that the threshold value of FDI that would induce a positive trade balance for Ghana is 7.825%. Moreover, it was established that there is a unidirectional causality between trade balance and FDI flowing from FDI to trade balance. Practical implications – Ghanaian policymakers ought to establish an FDI threshold monitoring mechanism to ensure inflows surpass 7.825%, promote investment diversification to mitigate reliance risks, enhance the investment climate and regulatory framework, strengthen export promotion initiatives and invest in human capital and technology transfer across key sectors for a favourable and sustainable trade position. Originality/value – This study is the first among its kind in Ghana and the first to apply both the ARDL and smooth threshold regression techniques in the same study. |
| format | Article |
| id | doaj-art-a9090344478e4ef8a850be7ba07a45a9 |
| institution | DOAJ |
| issn | 2586-3932 2632-122X |
| language | English |
| publishDate | 2025-04-01 |
| publisher | Emerald Publishing |
| record_format | Article |
| series | International Trade, Politics and Development |
| spelling | doaj-art-a9090344478e4ef8a850be7ba07a45a92025-08-20T03:05:44ZengEmerald PublishingInternational Trade, Politics and Development2586-39322632-122X2025-04-0191486710.1108/ITPD-04-2024-0017Determining the optimal threshold of foreign direct investment for sustainable improvement in Ghana’s trade balanceDavid Aboagye Danquah0Charles Barnor1Department of Banking and Finance, University of Professional Studies, Accra, GhanaDepartment of Banking and Finance, University of Professional Studies, Accra, GhanaPurpose – The main purpose of this study is to evaluate the threshold impact of foreign direct investment (FDI) on Ghana’s trade balance. Design/methodology/approach – The study used annual time-series data, spanning 1980–2022. The study employed the autoregressive distributed lag (ARDL) models, error correction models and smooth threshold regression techniques to establish the relationship between FDI and trade balance. Findings – The result of the study shows a positive and significant effect of FDI on trade balance in the short and long run on the Ghanaian economy. The study further revealed that the threshold value of FDI that would induce a positive trade balance for Ghana is 7.825%. Moreover, it was established that there is a unidirectional causality between trade balance and FDI flowing from FDI to trade balance. Practical implications – Ghanaian policymakers ought to establish an FDI threshold monitoring mechanism to ensure inflows surpass 7.825%, promote investment diversification to mitigate reliance risks, enhance the investment climate and regulatory framework, strengthen export promotion initiatives and invest in human capital and technology transfer across key sectors for a favourable and sustainable trade position. Originality/value – This study is the first among its kind in Ghana and the first to apply both the ARDL and smooth threshold regression techniques in the same study.https://www.emerald.com/insight/content/doi/10.1108/ITPD-04-2024-0017/full/pdfAutoregressive distributed lagForeign direct investmentGhanaThresholdTrade balanceEclectic paradigm |
| spellingShingle | David Aboagye Danquah Charles Barnor Determining the optimal threshold of foreign direct investment for sustainable improvement in Ghana’s trade balance International Trade, Politics and Development Autoregressive distributed lag Foreign direct investment Ghana Threshold Trade balance Eclectic paradigm |
| title | Determining the optimal threshold of foreign direct investment for sustainable improvement in Ghana’s trade balance |
| title_full | Determining the optimal threshold of foreign direct investment for sustainable improvement in Ghana’s trade balance |
| title_fullStr | Determining the optimal threshold of foreign direct investment for sustainable improvement in Ghana’s trade balance |
| title_full_unstemmed | Determining the optimal threshold of foreign direct investment for sustainable improvement in Ghana’s trade balance |
| title_short | Determining the optimal threshold of foreign direct investment for sustainable improvement in Ghana’s trade balance |
| title_sort | determining the optimal threshold of foreign direct investment for sustainable improvement in ghana s trade balance |
| topic | Autoregressive distributed lag Foreign direct investment Ghana Threshold Trade balance Eclectic paradigm |
| url | https://www.emerald.com/insight/content/doi/10.1108/ITPD-04-2024-0017/full/pdf |
| work_keys_str_mv | AT davidaboagyedanquah determiningtheoptimalthresholdofforeigndirectinvestmentforsustainableimprovementinghanastradebalance AT charlesbarnor determiningtheoptimalthresholdofforeigndirectinvestmentforsustainableimprovementinghanastradebalance |