Energy access and foreign direct investment in an emerging market: the Ghanaian perspective

Abstract

\nPurpose\nThis study aims to investigate the impact of energy access on foreign direct investment (FDI) in an emerging market.\n\n\nDesign/methodology/approach\nThe study uses the two-stage least square instrumental variables estimation approach to compute the parameters of the model to account for any potential endogeneity and time persistence in energy access.\n\n\nFindings\nThe results show that energy access significantly influences FDI inflows in Ghana. The results of the study also revealed that natural resources and macroeconomic variables such as real interest rate, gross domestic product growth rate are significant determinants of FDI inflows in Ghana.\n\n\nPractical implications\nThe practical implication of this study is that there is a need for energy sector policy reforms in Ghana that would guarantee a secured and continued supply of energy to enhance energy access to boost FDI. Ghana should aim for a cost-effective, stable and environmentally friendly source of energy as an alternative to hydro energy as the main source of its power generation to promote FDI. Also, Ghana should initiate and implement policies aimed at creating an enabling and stable macroeconomic environment, as macroeconomic factors in this study are found to be drivers of FDI.\n\n\nOriginality/value\nThis study provides firsthand information on energy access and FDI from the Ghanaian perspective.\n