Trade openness, foreign direct investment and industrialisation in Ghana

Figures & data

Table 1. Description of variables and source of data

Variable	Measurement	Data source	Sign Expectation	Empirical Justification
Industrialisation	Industrial value added (% of GDP)	WDI		Khobai and Moyo (2020); Samantha and Liu (2018); Njangang et al. (2018).
Trade Openness	Sum of Export and Imports (% of GDP)	WDI	Positive	Adamu and Dogan (2017); Khobai and Moyo (2020); Tahir et al. (2016)
Foreign Direct Investment	Net FDI inflows (% of GDP)	UNCTAD	Positive/ Negative	Gui-Diby and Renard (2015); Samantha and Liu (2018).
Gross Fixed Capital Formation	Gross Fixed Capital Formation (% of GDP)	WDI	Positive	Adegboye et al. (2016); Njangang et al. (2018);

WDI is World Development Indicator; UNCTAD is United Nations Conference of Trade and Development.

Table 2. Summary statistics of the regressand and the regressors

	INDUS	TOP	FDI	GFCF
Mean	22.8686	67.0858	2.3070	18.7860
Median	24.7168	69.5142	0.9872	20.2987
Maximum	34.8600	116.0484	8.4253	29.2463
Minimum	6.6285	11.5450	0.0248	3.7612
Std. Dev.	6.3848	24.7177	2.5289	6.7756
Skewness	−0.2160	−0.2211	0.8704	−0.2553
Jarque-Bera	0.3116	0.4741	5.4262	1.5269
Probability	0.8557	0.7889	0.0663	0.4660
Observations	37	37	37	37

Note: Std. Dev. represents Standard Deviation

Table 3. Results of unit root test with constant and trend: ADF test

Levels			First Difference
Variables	ADF-Statistics	Lag	Variables	ADF-Statistics	Lag	I(0)
INDUS	−2.9438[0.1619]	1	∆INDUS	−4.5942[0.0042]***	0	I(1)
TOP	−1.9607[0.6023]	0	∆TOP	−5.9861[0.0001]***	1	I(1)
FDI	−2.3015[0.4225]	0	∆FDI	−6.9415[0.0000]***	0	I(1)
GFCF	−2.5104[0.3216]	0	∆GFCF	−5.6409[0.0003]***	0	I(1)

Note: *** indicates the rejection of the null hypothesis of non-stationary at 1% significant level, ∆ denotes the first difference and I(0) is the lag order of integration. The values in parenthesis are the P-values.

Table 4. Results of unit root test with constant and trend: PP test

Levels			First Difference
Variables	PP-Statistics	BW	Variables	PP-Statistics	BW	I(0)
INDUS	−2.7744[0.2154]	1	∆INDUS	−4.5484[0.0047]***	9	I(1)
TOP	−1.9607[0.6023]	0	∆TOP	−6.1463[0.0001]***	4	I(1)
FDI	−2.4071[0.3699]	3	∆FDI	−6.9415[0.0000]***	2	I(1)
GFCF	−2.5223[0.3162]	3	∆GFCF	−6.0884[0.0001]***	7	I(1)

Note: *** indicates the rejection of the null hypothesis of non-stationary at 1% significant level, ∆ denotes the first difference, BW is the Band Width and I(0) is the lag order of integration. The values in parenthesis are the P-values.

Table 5. Bounds test results for symmetric and asymmetric co-integration

Critical Value Bound of the F-statistic: intercept and no trend
K	90% Level		95% Level		99% Level		K	90% Level		95% Level		99% Level
3	I(O) 2.37	I(1) 3.2	I(O) 2.79	I(1) 3.67	I(O) 3.65	I(1) 4.66	6	I(O) 1.99	I(1) 2.94	I(O) 2.27	I(1) 3.28	I(O) 2.88	I(1) 3.99
Calculated F-statistic: ${\mathrm{F}}_{\mathrm{I}\mathrm{N}\mathrm{D}\mathrm{U}\mathrm{S}}$ (INDUS|TOP, FDI, GFCF) 7.819306***							Calculated F-statistic:${\mathrm{F}}_{\mathrm{I}\mathrm{N}\mathrm{D}\mathrm{U}\mathrm{S}}(\mathrm{I}\mathrm{N}\mathrm{D}\mathrm{U}\mathrm{S}|\mathrm{T}\mathrm{O}{\mathrm{P}}^{+},\mathrm{T}\mathrm{O}{\mathrm{P}}^{-},\mathrm{F}\mathrm{D}{\mathrm{I}}^{+},\mathrm{F}\mathrm{D}{\mathrm{I}}^{-},$$\mathrm{G}\mathrm{F}\mathrm{C}{\mathrm{F}}^{+},\mathrm{G}\mathrm{F}\mathrm{C}{\mathrm{F}}^{-}$) 10.31640***

Note: *** denotes statistical significance at 1% level and K is the number of regressors.

Table 6. Estimated long-run model using ARDL and NARDL approaches

ARDL (2, 0, 2, 0) selected based on AIC Dependent Variable: INDUS			NARDL (2, 1, 2, 2, 2, 2, 2) selected based on AIC Dependent Variable: INDUS
Variable	Coefficient	P-values	Variable	Coefficient		P-values
TOP	0.0063 [0.0267]	0.8139	TOP_P	−0.2181 [0.1039]		0.0545
FDI	1.0955 [0.1975]	0.0000***	TOP_N	0.6368 [0.2681]		0.0323**
GFCF	0.5144 [0.0974]	0.0000***	FDI_P	3.4126 [1.3550]		0.0246**
C	10.9318 [1.8537]	0.0000***	FDI_N	−3.0457 [1.5062]		0.0627
			GFCF_P	0.4385 [0.1668]		0.0199**
			GFCF_N	−0.3652 [0.5705]		0.5324
			C	19.0473 [3.3375]		0.0001***
			Wald Test	TOP	FDI	GFCF
			F-statistic	10.3942 (0.0035)***	16.8537 (0.0004)***	2.1477 (0.1552)

Note: ***, ** represents 1% and 5% significant levels respectively. Standard errors are in parenthesis. TOP_P is positive trade openness, TOP_N is negative trade openness, FDI_P is positive foreign direct investment, FDI_N is negative foreign direct investment, GFCF_P is positive gross fixed capital formation and GFCF_N is negative gross fixed capital formation.

Table 7. Estimated short-run error correction model using ARDL and NARDL approaches

ARDL (2, 0, 2, 0) selected based on AIC Dependent Variable: INDUS			NARDL (2, 1, 2, 2, 2, 2, 2) selected based on AIC Dependent Variable: INDUS
Variable	Coefficient	P-values	Variable	Coefficient	P-values
D(INDUS(−1))	0.2881 [0.1040]	0.0100**	D(INDUS(−1))	−0.4481 [0.0959]	0.0004***
D(FDI)	−0.6856 [0.2590]	0.0134**	D(TOP*P)	−0.0129 [0.0201]	0.5305
D(FDI(−1))	−1.2235 [0.2799]	0.0002***	D(TOP*N)	0.1073 [0.0227]	0.0003***
ECM(−1)	−0.6871 [0.1026]	0.0000***	D(TOP*N(−1))	−0.0695 [0.0263]	0.0192**
			D(FDI*P)	0.7781 [0.1770]	0.0006***
			D(FDI*P(−1))	−1.6814 [0.2791]	0.0000***
			D(FDI*N)	−1.3026 [0.4600]	0.0133**
			D(FDI*N(−1))	1.4665 [0.4138]	0.0032**
			D(GFCF*P)	0.5884 [0.0641]	0.0000***
			D(GFCF*P(−1))	0.6226 [0.1029]	0.0000***
			D(GFCF*N)	−0.2539 [0.0868]	0.0110**
			D(GFCF*N(−1))	−0.5058 [0.0880]	0.0001***
			ECM(−1)	−0.4485 [0.0403]	0.0000***
R-squared		0.9130	R-squared		0.9872
Adjusted R-squared		0.8905	Adjusted R-squared		0.9698
F-statistic		40.485	F-statistic		56.844
Prob(F-statistic)		0.0000	Prob(F-statistic)		0.0000
Durbin-Watson statistic		2.2413	Durbin-Watson statistic		2.1344

Note: ***, ** represents 1% and 5% significant levels respectively. Standard errors are in parenthesis. TOP_P is positive trade openness, TOP_N is negative trade openness, FDI_P is positive foreign direct investment, FDI_N is negative foreign direct investment, GFCF_P is positive gross fixed capital formation and GFCF_N is negative gross fixed capital formation.

Table 8. Diagnostic tests

ARDL		NARDL
Test	F-statistic	Test	F-statistic
Serial Correlation	F(2, 25) = 0.5805[0.5670]	Serial Correlation	F(2, 12) = 0.2903[0.7531]
Functional Form	F(1, 26) = 0.0047[0.9457]	Functional Form	F(1, 13) = 3.1550[0.0991]
Normality	Jarque-Bera = 0.4443[0.8008]	Normality	Jarque-Bera = 0.2499[0.8825]
Heteroscedasticity	F(7, 27) = 1.6925[0.1531]	Heteroscedasticity	F(19, 14) = 1.6692[0.1661]

Figure 1. Dynamic multiplier of trade openness on industrialisation.

Figure 2. Dynamic multiplier of FDI on industrialisation.

Figure A1. Plot of cumulative sum of recursive residuals (ARDL).

Figure A2. Plot of cumulative sum of squares of recursive residuals (ARDL).

Figure A3. Plot of cumulative sum of recursive residuals (NARDL).

Figure A4. Plot of cumulative sum of squares of recursive residuals (NARDL).

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Data Availability Statement

The data is available upon request