According to Gabriele (2000), African countries increasingly adopt alternative strategies for mobilizing development finance.One notable strategy attempts to attract new inflows of FDI.
The study employs time series annual data on FDI, GDP per capita, Economic Openness, Exchange Rate, Political rights, Government Consumption Expenditure, Macro Economic Stability, and Natural Resource Endowment and Interest Rate from Ghana over the study period 1980 to 2014.
Also openness of the nation’s economy and market, and natural resources, its infrastructure, the size and level of governments expenditure and consumption and also the interest rate regime in the nation were the factors that determines Ghanas FDI.
Although studies have been conducted to explore the determinants of FDI, some of the core macroeconomic variables such as inflation, interest rate, telephone subscriptions, electricity production, etc., which are unstable and have longstanding effects on FDI have not been much explored to a give a clear picture of the relationships. (2019), "Analysis of the determinants of foreign direct investment in Ghana", Journal of Asian Business and Economic Studies, Vol. FDI is essentially an international investment where the investor gains significant influence in the management of an entity outside the investor’s home country (Solomon, 2011).
Therefore, a study that will explore these and other macroeconomic variables to give clear picture of their relationships and suggest some of the possible ways of dealing with these variables in order to attract more FDI for the country to achieve its goal is what this paper seeks to do. FDI under all circumstances has become an important force in the internationalization of investment activities in the global economy.
For example, from 1980–1989 to 1990–1998, FDI to Sub-Saharan Africa (SSA) grew by 59 percent.
This compares disproportionately with high increase of 5,200 percent for Europe and Central Asia, 942 percent for East Asia and Pacific, 740 percent for South Asia, 455 percent for Latin America and Caribbean and 672 percent for all developing countries.
It must be pointed out, however, that the motives behind these international capital flows are still substantially different than those related to the inflows of FDI to developing countries, in spite of the changes that have taken place over the last decades.
For example, the search for agricultural or mineral resources is much less important today than it was at the beginning of the twentieth century.
The factors that determine foreign direct investment (FDI) are important to policy-makers, investors, the banking industry and the public at large.
FDI in Ghana has received increased attention in recent times because its relevance in the Ghanaian economy is too critical to gloss over.