Determinants of private sector investment in Ghana, 1970-2011

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Private investment is viewed as a powerful tool for maintaining and expanding the capital stock and production capacity of an economy.Many developed and developing countries have for several decades relied greatly on it to solve their macroeconomic problems, particularly those related to growth and development.For this reason the government of Ghana is taking steps to smooth the way for the private sector through various policies to increase their investment levels. Hence, this study seeksto focus on the various factors that either stimulate or hinder private investment in Ghana. Using annual time series data from 1970 to 2011 the study employed the ARDL methodology to estimate the results. The results indicate that gross domestic product affect private investment in the long run and inflation affect it in the short run. However exchange rate affects private investment both in the long and short run periods. This results suggest the need for the government to promote growth enhancing policies likes improvement of physical and human capital to stimulate private investment.The findings and recommendations of this study will therefore provide vital information relevant for policy formulation and implementation aimed at boosting private investment in Ghana.
A Thesis Submitted to the Department of Economics, Kwame Nkrumah University of Science and Technology, in partial fulfillment of the requirements for the degree of Master of Philosophy in Economics.