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Does Financial Development Drive Private Investment in Ghana?

1
Department of Economics, Kwame Nkrumah University of Science and Technology, Kumasi, PMB, Ghana
2
Department of Economics, Annamalai University, Annamalai Nagar, 608002, Tamil Nadu, India
3
Department of Economics, Mangalore University, Mangaluru, 574119, India
*
Author to whom correspondence should be addressed.
Academic Editor: Helmi Hamdi
Economies 2016, 4(4), 27; https://doi.org/10.3390/economies4040027
Received: 5 May 2016 / Revised: 27 October 2016 / Accepted: 31 October 2016 / Published: 1 December 2016
(This article belongs to the Special Issue Financial Reform and Economic Development)
There is ample evidence from economic growth literature that investment accelerates economic growth and development of developing countries, of which Ghana is not an exception. Based on this, recent growth and development policies in Ghana have focused more on encouraging private sector investment through the development of the financial sector. This paper investigates the short- and long-run impact of financial development on private investment in Ghana for the years 1970–2014. Additionally, to find out whether the measurement of financial development matters for private investment, several indicators of financial development are used. The results, based on the ARDL bounds testing approach to cointegration, suggest that financial development has not been a key driver of private investment in the long run, while, in the short run, the effect of financial development on private investment depends on how financial development is measured. Given these results, policy makers should be circumspect regarding the choice of financial development indicator used as a policy instrument in the design and implementation of private investment policies for Ghana. View Full-Text
Keywords: financial development; private investment; ARDL; Ghana financial development; private investment; ARDL; Ghana
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Sakyi, D.; Kofi Boachie, M.; Immurana, M. Does Financial Development Drive Private Investment in Ghana? Economies 2016, 4, 27.

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