An investigation of the determinants of inward foreign direct investment flow into Ghana’s agricultural sector

Abstract

The paper investigated the factors that attracted foreign direct investment (FDI) into the Agricultural sector in Ghana over the period 1970- 2009 by estimation of a vector autoregressive model (VAR). Positive and statistically significant elasticities showed that nominal exchange rate, agricultural trade openness, GDP per capita, school enrolment and availability of uncultivated agricultural land were positively related to the dependent variable, FDI into agriculture. Available agricultural land and school enrolment showed the highest elasticities of 41.9 and 2.8 respectively, ahead of economic variables namely; nominal exchange rate, agricultural trade openness and GDP per capita. Policies with the objectives of strengthening school enrolment and access to available uncultivated agricultural land should be pursued. Improvement in international trade in agricultural products, economic growth and the strengthening of the current foreign exchange regime are required if Ghana hopes to attract more FDI into her agricultural sector.