EFFECTS OF REMITTANCES AND INFRASTRUCTURE ON PRIVATE INVESTMENT: EVIDENCE FROM GHANA

Samuel Mensah

Working Papers from African Economic Research Consortium

Abstract: This thesis examined the effects of remittances and infrastructure on private investment in Ghana. Specifically, the study investigated the combined effects of remittances and infrastructure on private investment as well as the causal relationship between remittances and private investment and between infrastructure and private investment. The Autoregressive Distributed Lag (ARDL) approach to cointegration was used with annual data from WDI, IMF, BOG and ISSER for the period of 1984 to 2017. The research finds that remittances alone does not influence private investment in Ghana. However, given the existence of infrastructure, remittances can simulate private investment in Ghana. The results indicate that existence of infrastructure might be a significant channel through which remittances affect private investment in Ghana. Thus, the net effect of remittances and infrastructure on private investment is empirically higher in promoting private investment in Ghana. The Granger Causality test reveals that there is bidirectional causality between remittances and private investment but unidirectional causality between infrastructure and private investment. Based on the findings, it is recommended that the Ministry of Finance should allocate more funds to the Ministry of Roads and Ministry of Power and Energy to boost infrastructural development such as road construction and electricity generation. This will create and ensure favorable investment climate for remittances to be invested.

Date: 2018-11-01
Note: African Economic Research Consortium
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