The Determinants of Private Sector Investment in Ghana: An ARDL Approach

Abstract

Abstract It is clear from successive governments that Ghana has unequivocally embraced the policy of a private sector-led growth strategy. Accordingly this study seeks to present an empirical assessment of factors that have either stimulated or dampened private sector investment in Ghana for the past several decades. Employing modern time series econometric techniques such as unit root tests, cointegration and error correction techniques within an ARDL framework the study reveals intriguing results. Results suggest that private investment is determined in the short-run by public investment, inflation, real interest rate, openness, real exchange rate and a regime of constitutional rule, while real output, inflation, external debt, real interest rate, openness and real exchange rate significantly influenced private investment response in the long-run. The findings and recommendations provide vital information relevant for policy formulation and implementation aimed at boosting private sector investment in Ghana.

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