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Foreign exchange rate moments and FDI in Ghana

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Abstract

In this paper, we estimate the effect of exchange rate moments on foreign direct investment (FDI). Using data from a developing country (specifically Ghana) during the years 1990–2012 and robust regression and bootstrap method, the study finds that FDI increases as a result of the depreciation of the local currency. Secondly, using standard deviation as a measure of volatility, we find positive relationship between exchange rate volatility and FDI. Skewness did not show any significant relationship with FDI, which is straight to the heart of the mean reverting principle of the exchange rate. We find the political atmosphere as one of the main factors of drawing FDI into Ghana. These results are robust in the presence of all the standard control variables having significant coefficients under the various methodologies.

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Acknowledgments

We acknowledge the University of Ghana Business School for supporting us financially to make this research possible.

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Authors and Affiliations

  1. University of Ghana Business School, Legon, Ghana

    Lord Mensah, Godfred Alufar Bokpin & Eric Dei Fosu-Hene

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  1. Lord Mensah
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  2. Godfred Alufar Bokpin
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  3. Eric Dei Fosu-Hene
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Correspondence to Lord Mensah.

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Mensah, L., Bokpin, G.A. & Fosu-Hene, E.D. Foreign exchange rate moments and FDI in Ghana. J Econ Finan 41, 136–152 (2017). https://doi.org/10.1007/s12197-015-9342-6

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  • DOI: https://doi.org/10.1007/s12197-015-9342-6

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