Research. FINAL

i
ABSTRACT
The purpose of this research is to give a thorough examination of the COVID-19 pandemic's
influence on Foreign Direct Investment (FDI) in Ghana. First, it sought to determine the volume
of FDI inflows throughout this period. Second, the study examined the effects of the COVID-19
pandemic on these FDI inflows. Third, it examined the efficacy of steps implemented to reduce
the pandemic's impact on FDI inflows.
A quantitative methodology was employed, utilizing Stata 13 for data analysis. This involved
descriptive statistics to outline FDI trends, correlation analysis to examine the relationship
between the pandemic and FDI, and regression analysis to evaluate the impact of mitigation
measures. This approach provided a comprehensive understanding of the pandemic's influence
on FDI in Ghana.
The study's findings show that Ghana's Foreign Direct Investment (FDI) landscape fluctuated
between 2018 and 2023. FDI was stable and increased until early 2020. With the development of
COVID-19, there was a large drop in FDI, driven by the pandemic's intensity, economic and
health policy responses, and interruptions in global supply networks and travel. Despite periods
of partial recovery, FDI fell again in 2023, suggesting persistent post-pandemic issues and an
altering global economic situation.
Given these results, it is imperative that policymakers and the Ghanaian government place a
greater emphasis on building digital infrastructure and encouraging technical innovation. In order
to attract a new wave of tech-oriented foreign direct investment (FDI), which is vital in the
expanding global digital economy, it is critical to strategically emphasise digital transformation.
In addition to helping with recovery after the epidemic, this investment in digital infrastructure
will make Ghana more resilient to global shocks in the future.
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TABLE OF CONTENTS
DECLARATION............................................................................................................................i
CERTIFICATION........................................................................................................................ii
ACKNOWLEDGEMENT...........................................................................................................iii
DEDICATION..............................................................................................................................iv
ABSTRACT....................................................................................................................................v
TABLE OF CONTENTS.............................................................................................................vi
LIST OF TABLES........................................................................................................................xi
LIST OF FIGURES.....................................................................................................................xii
CHAPTER ONE............................................................................................................................1
INTRODUCTION.........................................................................................................................1
1.1 Background of the Study...........................................................................................................1
1.2 Problem Statement.....................................................................................................................3
1.3 Research Aims...........................................................................................................................5
1.3.1 Research Objectives................................................................................................................5
1.4 Research Questions....................................................................................................................5
1.5 Significance of the Study...........................................................................................................6
1.6 Justification of the Study...........................................................................................................6
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1.7 Scope of the Study.....................................................................................................................8
1.8 Limitations of the Study............................................................................................................8
1.9 Organisation of the Study..........................................................................................................9
CHAPTER TWO.........................................................................................................................10
LITERATURE REVIEW...........................................................................................................10
2.1 Introduction..............................................................................................................................10
2.2 Conceptual Definitions............................................................................................................10
2.2.1 COVID-19 Pandemic............................................................................................................10
2.2.2 Foreign Direct Investments...................................................................................................12
2.3 Theoretical Review..................................................................................................................15
2.3.1 Economic Resilience Theory............................................................................................15
2.3.2 Risk and Uncertainty Theory............................................................................................17
2.3.3 Sectoral Shift Theory........................................................................................................20
2.4 Empirical Review and Hypothesis Development....................................................................23
2.4.1 Empirical Review..............................................................................................................23
2.4.2 Hypothesis Development..................................................................................................28
2.5 Review of The Magnitude of Foreign Direct Investment (FDI) Inflows................................31
2.5.1 Scale and Trends of FDI Inflows......................................................................................31
2.5.2 Factors Influencing FDI Inflows.......................................................................................33
2.5.2.1 Economic Policies......................................................................................................34
2.5.2.2 Political Stability........................................................................................................34
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2.5.2.3 Market Size.................................................................................................................35
2.5.2.4 Labor Costs................................................................................................................35
2.6 Review of the Influence of the COVID-19 Pandemic on FDI Inflows...................................36
2.6.1 COVID-19 Pandemic Severity on FDI Inflows................................................................36
2.6.2 Government Policies on FDI During COVID-19.............................................................37
2.6.3 Disrupted Supply Chains and FDI....................................................................................38
2.6.4 Travel Restrictions and FDI..............................................................................................38
2.6.5 Healthcare Infrastructure and FDI....................................................................................39
2.7 Review of the COVID-19 Mitigation Measures on FDI Inflows............................................41
2.7.1 COVID-19 Pandemic Severity on FDI Inflows................................................................41
2.7.2 Government Interventions and Policy Measures..............................................................42
2.7.3 Measures to Support Specific Sectors...............................................................................42
2.7.4 Efforts to Enhance Digital Infrastructure..........................................................................43
2.7.5 Strengthening Healthcare Systems....................................................................................44
2.8 Conceptual Framework............................................................................................................45
2.9 Chapter Summary....................................................................................................................47
CHAPTER THREE.....................................................................................................................49
RESEARCH METHODOLOGY...............................................................................................49
3.1 Introduction..............................................................................................................................49
3.2 Philosophy and Approach........................................................................................................49
3.3 Research Design......................................................................................................................50
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3.4 Population................................................................................................................................52
3.5 Sample Size and Sampling Procedure.....................................................................................53
3.6 Data Collection........................................................................................................................54
3.7 Validity and Reliability............................................................................................................54
3.8 Data Processing and Analysis..................................................................................................55
3.9 Justification of Variables.........................................................................................................56
3.10 Model Specification for the Study.........................................................................................56
3.11 Ethical Consideration.............................................................................................................57
3.12 Chapter Summary..................................................................................................................58
CHAPTER FOUR.......................................................................................................................59
RESULTS AND DISCUSSION..................................................................................................59
4.1 Introduction..............................................................................................................................59
4.2 The Magnitude of Foreign Direct Investment (FDI) Inflows..................................................60
4.2.1 Trends of FDI Inflows.......................................................................................................60
4.2.2 Yearly Trend of FDI For the Period 2018 To 2023..........................................................62
4.3 Influence of the COVID-19 Pandemic on FDI Inflows...........................................................64
4.3.1 Descriptive Statistics of COVID-19 Pandemic on FDI Inflows.......................................64
4.3.2 Correlation Analysis of COVID-19 Pandemic on FDI Inflows........................................66
4.3.3 Regression Analysis of COVID-19 Pandemic on FDI Inflows........................................68
4.4 COVID-19 Mitigation Measures on FDI Inflows...................................................................71
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4.4.1 Effectiveness of COVID-19 Mitigation Measures on FDI Inflows..................................71
4.4.1.1 Covid-19 Recorded Cases and Death........................................................................71
4.4.2 COVID-19 Mitigation Measures on FDI Inflows.............................................................73
4.5 Hypothesis Testing..................................................................................................................74
4.6 Quantitative Discussion of Findings........................................................................................76
4.6.1 The Magnitude of Foreign Direct Investment (FDI) Inflows...........................................76
4.6.2 Influence of the COVID-19 Pandemic on FDI Inflows....................................................77
4.6.4 Hypothesis Testing............................................................................................................82
CHAPTER FIVE.........................................................................................................................84
SUMMARY, CONCLUSION AND RECOMMENDATIONS...............................................84
5.1 Introduction..............................................................................................................................84
5.2 Summary of Findings..............................................................................................................84
5.2.1 The Magnitude of Foreign Direct Investment (FDI) Inflows...........................................84
5.2.2 Influence of the COVID-19 Pandemic on FDI Inflows....................................................85
5.3 Conclusion...............................................................................................................................88
5.4 Recommendations....................................................................................................................88
5.5 Suggestion for Future Studies..................................................................................................89
REFERENCES............................................................................................................................90
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LIST OF TABLES
Table 4.1 Descriptive Statistics: COVID-19 Pandemic on FDI Inflows.......................................64
Table 4.2 Correlation Analysis of COVID-19 Pandemic on FDI Inflows....................................66
Table 4.3 Regression Analysis of COVID-19 Pandemic on FDI Inflows.....................................68
Table 4.4 ADF and ARIMA Model Test.......................................................................................74
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LIST OF FIGURES
Figure 4.1 Trends of FDI Inflows for the Period 2018 to Second Quarter of 2023......................60
Figure 4.2 Yearly Trend of FDI For the Period.............................................................................62
Figure 4.3 Recorded Cases............................................................................................................71
Figure 4.4 Recorded Deaths..........................................................................................................72
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CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
Poulsen and Hufbauer (2021) define foreign direct investment (FDI) as a significant economic
occurrence in which organisations from one nation make investments in firms located in another
one. This process entails the movement of financial resources, expertise, and technological
advancements, and is crucial for achieving worldwide economic integration. As per the
International Monetary Fund (2020), Foreign Direct Investment (FDI) refers to an investment
made by an individual or entity with the intention of acquiring a long-term stake in a business
that operates in a different economy than that of the investor. The objective is generally to
impose a substantial level of control over the administration of the company.
Foreign Direct Investment (FDI) is of utmost importance in driving the economic progress of the
host nation, frequently serving as a catalyst for expansion. Nevertheless, foreign direct
investment (FDI) is susceptible to the impact of worldwide economic volatility and unexpected
disruptions. Recent studies have emphasised the susceptibility of foreign direct investment (FDI)
to various forms of crises. For example, Dornean and Oanea (2019) investigated the effects of
financial crises on foreign direct investment (FDI) and discovered that these events might result
in liquidity limitations for investors. Poulsen and Hufbauer (2021) observed the negative impact
of financial crises on the inflow of foreign direct investment (FDI). The study conducted by
Anuchitworawong and Thampanishvong (2021) provides more insight into the adverse effects of
natural disasters on foreign direct investment (FDI), specifically as a result of the devastation
caused to physical infrastructure.
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The emergence of the COVID-19 epidemic presented unparalleled difficulties for global foreign
direct investment (FDI). The pandemic, as officially classified by the World Health Organisation
(WHO) in 2020, resulted in substantial disruptions to worldwide trade and supply networks as a
consequence of lockdowns and social distancing protocols. Research focused on the effects of
the pandemic on foreign direct investment (FDI) has uncovered significant discoveries. In their
study, Camino-Mogro and Armijos (2020) investigated the influence of lockdown policies on
foreign direct investment (FDI) inflows in Ecuador, revealing a significant and detrimental
effect.
Furthermore, Fang, Collins, and Yao (2021) observed that the rise of COVID-19 instances had a
notable adverse impact on the overall foreign direct investment (FDI) inflows in 43 countries.
The consequences of this were especially harsh in the Americas and Europe. Hayakawa, and
Mukunoki (2021) conducted a thorough study in their Asian Development Bank working paper,
revealing that the pandemic had varying effects on different sectors and entry modalities of
foreign direct investment (FDI). COVID-19 had a detrimental effect on both new foreign direct
investment (FDI) projects and mergers and acquisitions (M&A) between companies in the
manufacturing industry. Nevertheless, the service sector saw negative consequences on
greenfield foreign direct investment (FDI) from both the country where the investment is made
and the country where the investor is based. However, the effect on cross-border mergers and
acquisitions (M&A) was not as strong.
The significance of this information for studying Ghana's foreign direct investment (FDI) in the
context of the COVID-19 epidemic is noteworthy, considering its applicability and implications.
The knowledge gained by analysing worldwide patterns and the consequences of the pandemic
on foreign direct investment (FDI) may be directly applied to Ghana, a nation that largely
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depends on FDI to drive its economic growth. Gaining insight into these patterns is crucial for
developing strategies to attract and maintain foreign direct investment, particularly during
periods of global economic instability. For Ghana, this entails formulating policies that prioritise
the stabilisation of investment flows, establishing a conducive policy framework, and allocating
resources to sectors that are resistant to global disruptions. This strategy is essential not just for
the immediate economic recovery after the epidemic but also for long-term sustainable
development, in line with the wider objectives of economic resilience and inclusion.
1.2 Problem Statement
Foreign Direct Investment (FDI) plays a crucial role in the economic progress of nations such as
Ghana, which rely significantly on it for different economic improvements (Shahzad et al.,
2022). Nevertheless, the emergence of the COVID-19 pandemic has significantly transformed
this situation. The epidemic has not only caused significant disruptions to the worldwide
economy, but it has also had special ramifications for Foreign Direct Investment (FDI) in Ghana.
The disturbance led to a decrease in foreign direct investment (FDI) inflows, which had an
impact on industries such as agriculture, manufacturing, and tourism (Adams and Boateng,
2020).
Ghana has experienced sector-specific issues, which have had diverse effects on various
businesses. Specifically, the manufacturing industry had difficulties as a result of disruptions in
the availability of primary resources and a decline in the market demand for non-essential
products (Agyapong, 2022). As a result, there was a decrease in output and the possibility of job
cuts, while the agricultural industry faced interruptions in supply chains and a scarcity of labour
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(Ofori and Danso, 2022). The impact of this on Ghana's agricultural productivity and export was
significant, as the country's agriculture relies heavily on physical labor and external markets. The
tourist sector in Ghana, which plays a substantial role in the economy, had a severe downturn as
a result of travel limitations and lockdown measures. Consequently, there were financial setbacks
and adverse impacts on enterprises that heavily depend on tourism according to (Mensah, 2021).
To comprehensively comprehend the economic repercussions of the pandemic, it is necessary to
do a sector-specific study due to the unequal effects it has had (Ofori and Danso, 2022).
The present research on the impacts of the COVID-19 epidemic on Foreign Direct Investment
(FDI) in Ghana provided interesting insights but also revealed notable gaps. Studies, such as Abu
and Issahaku (2020), offer a broad perspective on the economic consequences of COVID-19 in
Ghana, but they do not particularly examine the entrance of foreign direct investment (FDI). The
study conducted by Kofinti et al. (2023) investigates the ability of companies to withstand the
challenges posed by the pandemic by analysing their digital investments. However, it does not
specifically evaluate the influence of these investments on foreign direct investment (FDI).
Gyamfi (2023) examines the impact of COVID-19 lockdowns on the labour market, however,
the study did not establish a connection between study findings and foreign direct investment
(FDI) inflows.
This study sought to fill these gaps by conducting a quantitative analysis of the extent of foreign
direct investment (FDI) inflows into Ghana from 2018 to mid-2023. It intended to quantify the
precise impact of COVID-19 on these inflows and evaluate the efficacy of actions adopted to
reduce the pandemic's influence on FDI. The objective was to augment comprehension of the
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impact of the pandemic on Ghana's Foreign Direct Investment (FDI), a crucial factor in
formulating effective policies and devising plans for economic recovery.
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1.3 Research Aims
The objective of the study is to assess the precise impacts of the COVID-19 pandemic on the
movement and patterns of Foreign Direct Investment in Ghana.
1.3.1 Research Objectives
This research paper sought to achieve the following objectives;
i. To ascertain the magnitude of Foreign Direct Investment (FDI) inflows from 2018 to the
second quarter of 2023.
ii. To analyze the influence of the COVID-19 pandemic on FDI inflows during this period.
iii. To investigate the effectiveness measures implemented to mitigate the impact of the
COVID-19 pandemic on FDI inflows.
1.4 Research Questions
The study answered the following answered questions;
i. What is the magnitude of FDI inflows for the period 2018 to second quarter of 2023?
ii. What extent has the COVID-19 pandemic affected the inflows of Foreign Direct
Investments during this period?
iii. How has the COVID-19 pandemic’s mitigating measures impacted FDI during the period
2018 to second quarter of 2023?
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1.5 Significance of the Study
The COVID-19 pandemic has significantly impacted the global economy, necessitating a
thorough assessment of the impact of FDI inflows. The study has a broad and significant impact.
The findings may be utilised by governments and policymakers to develop policies that
effectively attract and retain foreign direct investment (FDI), which is essential for ensuring
economic stability. Insights into Ghana's investment climate amid crises are aimed to provide
investors, both local and foreign, with the necessary information to make well-informed
decisions. In addition, economic analysts and scholars may enhance economic literature by
comprehending the impact of the pandemic on foreign direct investment (FDI), while
international organisations could provide specific assistance to Ghana. In conclusion, the
findings of the study have the potential to have a favourable effect on employment generation
and improve Ghana's overall economic prosperity.
1.6 Justification of the Study
An examination of the effects of the COVID-19 pandemic on Foreign Direct Investment (FDI) in
Ghana is highly significant in comprehending the economic consequences of a worldwide health
catastrophe on a developing country. Foreign Direct Investment has been a cornerstone in
Ghana's economic development, notably contributing to employment, technical innovation,
infrastructure improvement, and overall economic growth (Asiedu and Gyimah-Brempong,
2021). The emergence of the COVID-19 epidemic presented unique and unparalleled difficulties,
requiring a thorough examination of its influence on foreign direct investment (FDI).
Foreign direct investment (FDI) has played a crucial role in propelling Ghana's economic
growth, especially in expanding the country's economy beyond its traditional agricultural base.
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Like many countries, Ghana's economy is vulnerable to the pandemic's huge global reach and the
resulting economic shockwaves (Ofori and Danso, 2022). Understanding the Ghanaian
economy's robustness and adaptation in the face of such challenging times is of the utmost
significance, as this circumstance has shown (Asiedu and Gyimah-Brempong, 2021).
Ofori and Danso (2022) notes that Ghana's manufacturing and service industries were among the
most hit by the sudden disruption of global supply chains, trade restrictions, and decreased global
demand. In light of these disturbances, it is important to look at Ghana's economic resilience in
relation to external shocks, particularly as it pertains to foreign direct investment (FDI). It is
critical for the Ghanaian government and companies to understand how foreign investors' risk
perceptions have changed due to the epidemic in order to formulate and adjust policies
effectively (Kwakye, 2021).
A robust and diverse economy is even more important now that the epidemic has shown how
important it is. According to Asante and Opoku (2023), this research has the potential to provide
strategic insights on how Ghana should diversify its foreign direct investment portfolio in order
to lessen the effects of future global crises. In order to make informed decisions and create long-
term strategies for economic recovery in Ghana and beyond, it is crucial to comprehend the risks
and policy consequences stemming from this crisis.
Beyond its immediate ramifications for the country in question, this research adds to the
knowledge of the interplay between national economies and the global economy during crisis
situations, providing useful comparisons and lessons for countries throughout the world. The
study contributes to the understanding of the worldwide economic effects of the pandemic and
Ghana's position in the international investment landscape by analysing the country's experience
in relation to regional and global trends (Mensah, 2021; Boateng, 2022).
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Ultimately, this study substantiates its importance from several perspectives. This analysis offers
significant insights on Ghana's economic resilience and the effectiveness of governmental
measures implemented in response to the pandemic. Furthermore, it enhances the overall
discussion on the influence of the pandemic on foreign direct investment (FDI) in developing
nations, so assisting in the development of efficient worldwide and regional economic strategies.
1.7 Scope of the Study
This study aimed to analyse the effects of the COVID-19 pandemic on Foreign Direct
Investment (FDI) in Ghana, namely from 2018 to the second quarter of 2023. The study
evaluated the patterns of foreign direct investment (FDI), the prevalence of COVID-19 cases,
and the rates of death in Ghana. The study also evaluated the effects of the COVID-19 pandemic
on foreign direct investment (FDI), specifically examining the influence on factors such as the
number of confirmed cases and death rates, government policies, disrupted supply chains, travel
restrictions, and healthcare infrastructure. The analysis employed secondary data obtained from
many sources, including the Ghana Investment Promotion Centre, Bank of Ghana, Ministry of
Finance and Economic Planning, Ghana Health Service, and the World Bank. The data analysed
the patterns of Foreign Direct Investment (FDI) during the epidemic in 2020 and the subsequent
measurements and trends until mid-2023, which reflected the economic recovery and
adjustments after the outbreak. The data collected was analysed with time series analysis
techniques utilising the STATA programme.
1.8 Limitations of the Study
A major constraint was the limited accessibility and reliability of data. The precision of the study
was affected by constraints in data reporting and gathering, despite efforts to get reliable and up-
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to-date data from trustworthy sources such as the Ghana Investment Promotion Centre and the
Bank of Ghana. The accuracy of the findings was compromised due to inconsistencies in data
reporting standards and the possibility of missing or incomplete data. The outcomes of this study
were contextually particular to Ghana and not applicable to other countries. The epidemic had
varying impacts on each nation, and their economic resilience differed as well. Therefore, it was
crucial to be cautious when extending these findings to diverse contexts. The study
predominantly concentrated on the economic facets of Foreign Direct Investment (FDI) in
relation to the pandemic. Although the paper briefly mentioned government actions, it did not
further explore the political, social, or ethical aspects of these policies, which may have offered a
more comprehensive viewpoint.
1.9 Organisation of the Study
This study was organized into five (5) major chapters. The first chapter covered the background
of the study, problem statement, research aims and objectives, research questions, significance,
justification, scope, and limitations of the study. The second chapter provided a detailed review
of literature on Foreign Direct Investment, COVID-19 pandemic and impact of COVID-19 on
Foreign Direct Investment. The third chapter focused on the methodology utilised in this study,
encompassing the methods and procedures implemented for data collecting, the sources of data
employed, the sampling strategies employed, and the method of data analysis. Chapter four
provided the discussion of the results and findings and data analysis on data collected based on
the objectives of the study. The final chapter five provided summary of the study, conclusion
drawn from the research findings.
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CHAPTER TWO
LITERATURE REVIEW
2.1 Introduction
This literature analysis evaluated the impact of the COVID-19 pandemic on Ghana's foreign
direct investment patterns. This literature review focused on providing clear definitions of
important words then delves into an examination of three significant theories: Economic
Resilience, Risk and Uncertainty, and Sectoral Shift. The analysis of empirical research on
COVID-19's impact on FDI in various countries, particularly in Ghana, provided valuable
contextual insights as well research hypothesis development.
2.2 Conceptual Definitions
2.2.1 COVID-19 Pandemic
The COVID-19 pandemic, triggered by the new coronavirus SARS-CoV-2, has emerged as a
worldwide health disaster of unparalleled magnitude (Agyeman, et al., 2020). The virus emerged
in Wuhan, China, in late 2019 and rapidly disseminated globally, prompting the World Health
Organisation to officially designate it a pandemic on March 11, 2020. The onset of a hard phase
for Ghana started on March 12, 2020, when the initial instances of COVID-19 were officially
verified (Boafo, et al., 2021).
Ghana has implemented a diverse array of public health initiatives in its reaction to the epidemic.
At first, the government implemented measures to limit travel, such as implementing partial
lockdowns in key cities like Accra and Kumasi, in order to control the spread of the virus
(Amoah, 2022). These interventions successfully reduced the rate of transmission, but with
11
notable economic and societal consequences. The closure of schools and the prohibition of
meetings had a significant impact on the education sector and numerous cultural activities
(Agyeman, et al., 2020).
The economic repercussions of COVID-19 in Ghana are significant and should not be
underestimated. The worldwide supply chains were affected by the epidemic, leading to an
impact on Ghana's export markets, namely in the areas of cocoa and oil (Mensah, et al., 2021).
Furthermore, the tourist sector, a substantial contributor to Ghana's Gross Domestic Product
(GDP), saw a severe decline as a result of travel limitations. The government implemented
economic assistance programmes to provide help to companies and individuals who have been
impacted by the epidemic (Boafo, et al., 2021).
Ghana's public health system encountered several obstacles in the healthcare sector, such as a
scarcity of medical supplies and personal protective equipment (PPE). The government, in
conjunction with global allies, attempted to enhance testing capabilities and construct isolation
and treatment facilities nationwide (Amoah, 2022). Additionally, endeavours were undertaken to
augment public consciousness regarding the virus and advocate for health measures like as
mask-wearing and adherence to social distancing guidelines (Mensah, et al., 2021).
Vaccination has played a crucial role in Ghana's approach to combating the COVID-19
pandemic. Ghana was the inaugural recipient of vaccinations under the COVAX project, a
worldwide endeavour aimed at ensuring fair and impartial distribution of COVID-19 vaccines
(Boafo, et al., 2021). The vaccine programme started in March 2021, with a primary emphasis on
healthcare professionals, the elderly population, and persons with pre-existing medical disorders.
The immunisation campaign has faced initial obstacles such as vaccine hesitancy and supply
shortages. However, it has steadily gained pace (Amoah, 2022).
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To summarise, Ghana's encounter with the COVID-19 epidemic demonstrates an intricate
interaction of public health, economic, and societal difficulties. The government's preemptive
interventions, encompassing lockdowns, economic stimulus, and vaccine drives, have been
pivotal in effectively controlling the epidemic. Nevertheless, the enduring consequences of
COVID-19 on Ghana's economy and healthcare system are expected to persist for an extended
period. This highlights the significance of worldwide collaboration and continuous public health
endeavours to tackle such unparalleled health emergencies.
2.2.2 Foreign Direct Investments
Akpalu (2020) argues that foreign Direct Investment (FDI) is a crucial factor in the economic
progress of several nations, providing a valuable influx of cash, technology, and expertise. FDI
has played a crucial role in Ghana's economic growth and development policies. Ghana,
renowned for its political stability and implementation of economic reforms, has emerged as a
highly appealing location for international investors in the West African area (Mensah, 2019).
The FDI environment in Ghana has seen substantial changes over time. Throughout history,
international investors have been primarily drawn to the country because to its abundant natural
resources, including gold, cocoa, and more recently, oil and gas Akpalu (2020). The Ghanaian
government has developed several measures to facilitate a favourable environment for
international investors, acknowledging the significance of international Direct Investment (FDI).
These encompass legislative changes aimed at streamlining the investment procedure, enhancing
the commercial environment, and providing inducements for foreign enterprises (Osei and
Agyemang, 2020).
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The Ghana Investment Promotion Centre (GIPC) has a crucial function in encouraging and
facilitating Foreign Direct Investment (FDI). The organisation offers vital services and
information to international investors and strives to improve Ghana's appeal as a preferred
investment location (Mensah, 2021). The endeavours of GIPC have played a crucial role in
enticing investments across several industries like as manufacturing, telecommunication, and
services. As a result, the inflow of foreign direct investment has become more diversified,
moving away from the conventional dependence on natural resources (GIPC, 2021).
FDI has a complex and diverse effect on the economy of Ghana. It has made a substantial
contribution to the creation of jobs, the transfer of technology, and the growth of emerging
industries. The presence of multinational firms in telecommunications and financial services has
significantly altered these industries, bringing to the introduction of novel technology and
services (Mensah, 2021). Furthermore, Foreign Direct Investment (FDI) has been crucial in the
advancement of Ghana's oil and gas industry, which has emerged as a substantial contributor to
the nation's Gross Domestic Product (GDP) (Agyekum, et al., 2021).
Nevertheless, the circumstance presents certain difficulties according to Akpalu (2020). There
are concerns over the environmental and socioeconomic consequences of some foreign
investments, namely in the fields of mining and oil production. There is a demand for stricter
laws and improved enforcement to guarantee that foreign investments are both sustainable and
socially responsible (Mensah, 2021; Akpalu, 2020).
Ghana's government has prioritised soliciting Foreign Direct Investment (FDI) to support its
industrialization efforts in recent years. The objective of initiatives such as the "One District,
One Factory" strategy is to decentralise industrial growth and foster local involvement in the
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economy. The purpose of this strategy is to encourage investment in rural and semi-urban
regions, with the aim of promoting equitable regional development (Agyekum, et al., 2021).
In conclusion, FDI has played a crucial role in Ghana's economic success, making significant
contributions to its growth, development, and modernization. The government's endeavours to
enhance the investment environment and broaden the origins of foreign direct investment (FDI)
have produced favourable outcomes. Nevertheless, the task of reconciling the advantageous
economic outcomes of foreign direct investment (FDI) with the need of safeguarding the
environment and fulfilling social obligations continues to be a significant hurdle. In order for
Ghana to maintain its status as a prominent investment hub in Africa, it must consistently adjust
its policies to promote long-lasting and equitable economic expansion.
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2.3 Theoretical Review
The theoretical evaluation of the paper focused on analysing the effects of the COVID-19
epidemic on Foreign Direct Investment (FDI) in Ghana. It was important to analyse frameworks
that captured the intricate nature of this global problem and its economic consequences. The
primary theoretical framework informing this analysis was Economic Resilience, supplemented
by the Risk and Uncertainty, and Sectoral Shift theories. These theoretical frameworks
collectively provided an in-depth understanding of the pandemic's influence on foreign direct
investment (FDI).
2.3.1 Economic Resilience Theory
The core concept of Economic Resilience Theory, as proposed by Briguglio et al. (2019), centres
on an economy's ability to endure or bounce back from the impacts of disturbances. This
encompasses not only the capacity to revert to a state prior to a shock but also the capability to
adjust and undergo a metamorphosis in reaction to altered circumstances. Economic resilience
has two fundamental aspects: the capability to effectively withstand and absorb unexpected
disruptions (absorptive capacity) and the capacity to flexibly adjust and undergo transformational
changes (adaptive and transformative capacities). As stated by Barrett & Caniglia (2023),
absorptive capacity pertains to the capability of reducing the immediate consequences of
disruptions, whereas adaptive and transformational capabilities encompass enduring
modifications in economic framework and strategies as a reaction to evolving circumstances.
The application of Economic Resilience Theory is particularly suitable and insightful in the
Ghanaian setting. Fosu (2020) contended that Ghana, like to several other nations, has seen
substantial economic upheavals as a result of the COVID-19 epidemic. This hypothesis offers a
16
framework for evaluating the extent to which the Ghanaian economy has successfully absorbed
the initial impact of the epidemic. This involves assessing the efficacy of government actions and
the resilience of the private sector. Moreover, the theory facilitates the analysis of Ghana's
capacity to adjust and reshape its economic framework in light of the novel challenges presented
by the epidemic.
The first notable application of Economic Resilience Theory entails a thorough analysis of
Ghana's economic policies and institutional structures within the epidemic. Fosu (2020)
highlighted the significance of assessing the prompt initiatives used by the government,
including fiscal stimulus packages, monetary policy adjustments, and emergency health
measures. The Economic Resilience Theory provides a framework for assessing the efficacy of
these policies in reducing the immediate impacts of the pandemic. It analyses the sufficiency and
timeliness of fiscal measures aimed at supporting the sectors most severely impacted, as stated
by Briguglio et al. (2019).
The assessment of resilience across different sectors of the Ghanaian economy is also guided by
Economic Resilience Theory. It aids in identifying the industries that were most susceptible to
the pandemic and those that demonstrated resilience. For example, while the tourist and
hospitality sectors experienced declines, businesses such as agriculture and digital services
showed promise for higher resilience. By considering aspects including nature of the sector,
government support, and the level of digital integration, the theory helps deduce how resilient
certain sectors are (Barrett & Caniglia, 2023).
The application of Economic Resilience Theory is crucial in identifying the elements that either
facilitate or impede economic resilience. This entails analysing the degree of economic
diversification in Ghana and its influence on the economy's resilience in the face of the epidemic.
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The research emphasises the significance of robust health and social safety systems, as well as
the extent of technology integration, which has been expedited by the pandemic. These aspects
offer valuable insights into the strengths and vulnerabilities of Ghana's economy (Carpenter et
al., 2022).
Finally, the pandemic's long-term effects on Ghana's economic growth trajectory may be better
understood with the help of Economic Resilience Theory. It argues that crises may also be
chances for progress that is really revolutionary. According to Martin and Sunley (2021), the
pandemic in Ghana has the potential to spur digital change, broaden the economy's base of
support, and fortify healthcare and social protection services.
Ultimately, Economic Resilience Theory offers a good framework for examining Ghana's
reaction to the COVID-19 outbreak, providing significant insights into both short-term tactics
and long-term economic growth prospects.
2.3.2 Risk and Uncertainty Theory
The crux of Risk and Uncertainty Theory rests in differentiating between 'risk', which refers to
situations where outcomes are unknown but can be quantified, and 'uncertainty', which refers to
situations where the likelihood of outcomes cannot be determined. The distinction was initially
expressed by Frank Knight in his influential publication, "Risk, Uncertainty, and Profit" (Knight,
1921). Knight proposed that risk pertains to conditions that can be measured or quantified,
whereas uncertainty refers to circumstances where probabilities are either unknown or cannot be
measured. When faced with uncertain situations, decision-making goes beyond statistical
calculations and involves the use of judgement and flexibility.
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The relevance of Risk and Uncertainty Theory in analysing Ghana's reaction to the COVID-19
outbreak is of utmost importance. The epidemic has brought about a significant level of
unpredictability in both global and local economics. Ghana has faced the enormous problem of
dealing with these uncertainties, especially given its status as a developing economy with
substantial foreign direct investment (FDI) interests (Ackert and Deaves, 2020). Ackert and
Deaves (2020) contend that in such circumstances, it is important to comprehend the decision-
making mechanisms employed by enterprises, investors, and politicians. This theory offers a
framework for analysing and comprehending the behavioural adjustments made in response to
the uncertainty caused by the epidemic.
Applying Risk and Uncertainty Theory to Ghana's economic circumstances during the COVID-
19 epidemic reveals the complexities of decision-making in a time marked by unparalleled
unpredictability. This theory, which is crucial for comprehending reactions to situations with
uncertain outcomes, has significant ramifications for several facets of Ghana's economic
environment during the epidemic.
The theory of Risk and Uncertainty sheds light on the changes in investment trends, both
domestically in Ghana and from foreign investors. Amidst the increased uncertainty caused by
the epidemic on a worldwide scale, investors in Ghana demonstrated a deliberate shift in their
approach. Amidst the epidemic, there was a clear inclination towards liquid assets or industries
that were considered safer. This is consistent with the premise of the theory that states that when
faced with uncertainty, investors tend to reassess their willingness to take risks and their
preferences, as proposed by (Baker et al., 2020). The hypothesis suggests that during periods of
uncertainty, such as a worldwide epidemic, people are more inclined to avoid engaging in risky
endeavours. The reassessment in Ghana resulted in a change in the investment environment,
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where prudent techniques became more important than bolder investment tactics (Ackert and
Deaves, 2020).
A further tool for analysing the Ghanaian government's pandemic response is the Risk and
Uncertainty Theory. Baker et al. (2020) states that leaders' decisions during the epidemic were
frequently marked by a lack of accurate knowledge on the path of the virus, its financial
consequences, and prospective measures' effectiveness. Ackert and Deaves (2020) propose that
this theory offers a systematic structure for comprehending intricate decision-making processes.
The statement underscores the delicate task confronted by the Ghanaian government in
navigating the uncertainties of the epidemic while formulating policy choices. In such situations,
governments are frequently required to negotiate a precarious course filled with danger and
uncertainty, as they make choices that might have significant consequences for the economy.
Moreover, Risk and Uncertainty Theory provides valuable understanding of the adjustments
made by firms and markets in Ghana in reaction to the swiftly changing pandemic
circumstances. The approach emphasises that adjustments made during times of uncertainty are
not simply reactive, but rather deliberate strategic choices made in response to unknown hazards
(Ackert and Deaves, 2020). Ghanaian firms had to undertake operational, supply chain, and
strategic restructuring to manage the risks linked to the epidemic. This entailed adopting digital
transformation, expanding supplier sources, and enforcing new health and safety norms. These
adaptations, as proposed by the theory, demonstrate deliberate tactics employed to navigate an
environment where conventional economic models were disrupted by the epidemic (Baker et al.,
2020).
In essence, applying Risk and Uncertainty Theory to Ghana's economic situation during the
COVID-19 epidemic exposes the intricacy and intricateness of decision-making procedures in
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uncertain circumstances. It offers a detailed comprehension of how investment patterns changed,
how the government's legislative solutions were developed, and how businesses adjusted to an
environment altered by the epidemic. This theoretical framework emphasises the ever-changing
character of economic decision-making during periods of uncertainty, focusing on the many
techniques adopted by various economic agents in Ghana to address the difficulties presented by
the COVID-19 epidemic.
2.3.3 Sectoral Shift Theory
The Sectoral Shift Theory posits that economies undergo perpetual change, as resources, labour,
and capital migrate across various sectors throughout time. The driving forces behind this trend
encompass a range of elements, including as technical advancements, shifts in consumer tastes,
globalisation, and external disruptions like a pandemic. According to Lilien (2022), the theory
suggests that significant changes in labour demand in different businesses or sectors can cause
structural changes in the economy, which in turn impact employment, productivity, and total
economic development.
The profoundness of the applicability of Sectoral Shift Theory in analysing the economic
repercussions of the COVID-19 outbreak in Ghana cannot be overstated. The pandemic has had
a substantial influence on Ghana's economy, similar to other economies. However, several
industries have seen more severe consequences than others (Lilien, 2022). For example,
industries like tourism and hospitality have seen significant obstacles, but sectors like healthcare,
digital services, and e-commerce have had a substantial increase in demand. By utilising this
approach, it is feasible to methodically examine the extent to which the pandemic has hastened
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or slowed down progress in different sectors, resulting in a restructuring of the economic terrain
in Ghana (Acemoglu and Autor, 2021).
The Sectoral Shift Theory offers a framework to analyse the varying effects of the epidemic on
different sectors in Ghana. According to Acemoglu and Autor (2021), economic crises can cause
substantial shifts of labour and capital between different sectors. In Ghana, the tourist and
hospitality industries faced a significant decline, whilst sectors such as healthcare and digital
services witnessed development. This approach facilitates comprehension of these transitions as
reactions to alterations in demand, technical progress, and disruptions in supply systems induced
by the epidemic.
The knowledge acquired from this theory is crucial in directing policy development and
economic strategizing in Ghana. The government may effectively customise its policies by
identifying the sectors that are experiencing contraction and expansion (Acemoglu and Autor,
2021). According to Moretti (2022), providing focused assistance to expanding industries and
making strategic investments will help reduce the negative impact on declining sectors and
enhance overall economic resilience.
The notion emphasises the necessity of adjusting the workforce to meet the evolving demands of
different sectors. The transition of the Ghanaian economy towards sectors driven by technology
requires a commensurate adaptation in the capabilities of the workforce (Acemoglu and Autor,
2021). According to Katz and Krueger (2020), it is essential to implement effective workforce
adaptation methods, such as retraining and upskilling programmes, to facilitate the smooth
movement of workers into growing industries.
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Utilising Sectoral Shift Theory also emphasises the possibility of enduring alterations in Ghana's
economic framework. According to Acemoglu and Autor (2020), the changes caused by the
pandemic may not be ephemeral but might result in a lasting economic transition. This viewpoint
is crucial for formulating Ghana's economic strategy after the pandemic, considering the
probability of a shift towards a more technology-driven and healthcare-centered economy.
Sectoral Shift Theory provides useful insights into the economic transformation occurring in
Ghana because to the COVID-19 outbreak. This statement highlights the process of
redistributing resources across different sectors, informing policy choices, and emphasising the
need for workforce adjustment. Additionally, it suggests the potential for a significant and lasting
change of the Ghanaian economy.
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2.4 Empirical Review and Hypothesis Development
2.4.1 Empirical Review
Researchers have extensively examined this relationship for many years, and the empirical
evidence varies among countries. However, it can be confidently concluded that in developing
economies, foreign direct investment (FDI) inflows have a positive effect on economic growth.
Chattoraj and Ullah (2023) state that this is due to the fact that foreign direct investment (FDI)
boosts productivity in developing countries, particularly in environments that are friendly to
attracting and keeping FDI as a source of technology, innovation, employment opportunities, and
globalisation.
Liang et al. (2021) conducted a study utilising data from 113 emerging economies. They
discovered that the fixed effect model indicated a positive correlation between foreign direct
investment (FDI) inflows and economic development. In their study, Fadhil and Almsafir (2019)
performed an empirical research to determine the correlation between foreign direct investment
(FDI) inflows and the economic development of Malaysia. The researchers contend that
Malaysia has established itself as a prominent hub for international investors in Southeast Asia,
consistently drawing substantial inflows of foreign direct investment (FDI). Based on time series
data spanning from 2015 to 2019, researchers determined that Foreign Direct Investment (FDI)
inflows have a beneficial effect on Malaysia's economic growth. However, in order to maximise
the advantages of FDI inflows through technological spillovers, it is crucial to prioritise the
development of human capital.
Omri and Sassi-Tmar (2019) conducted a study to analyse the correlation between foreign direct
investment (FDI) inflows and the economic development of Tunisia, Morocco, and Egypt. The
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study focused on the time period from 2015 to 2019. The findings of the generalised method of
moments (GMM) indicated a favourable correlation between foreign direct investment (FDI)
inflows and economic development in three African nations.
Rjoub et al. (2019) did a panel data analysis using 234 panel observations from Sub-Saharan
Africa (SSA) covering the years 1995-2019 to examine the same connection. Foreign direct
investment (FDI) flows have a strong and significant positive correlation with GDP development
in landlocked sub-Saharan African (SSA) countries, even after accounting for factors such as
trade openness, inflation, government expenditure, natural resource availability, and human
capital. In addition, the writers found that foreign investment did not replace domestic
investment.
The effects of the COVID-19 epidemic on foreign direct investment (FDI) in Nepal are
thoroughly examined in the research paper by Regmi (2023). The quantitative methodologies
used in Regmi's analysis are based on secondary data analyses of a variety of authoritative
sources, including the World Bank, UNCTAD, the Nepalese government's Department of
Industry, and Nepal Rastra Bank, among others. The study takes a descriptive and analytical
approach. Foreign direct investment (FDI) pledges in Nepal have dropped sharply as a result of
the pandemic, according to this report (Regmi, 2023). Other obstacles include the country's
economic climate, infrastructure problems, and political instability.
In a similar vein, Issahaku and Abu's (2020) research examines the budgetary and poverty-
related effects of the COVID-19 epidemic in Ghana using a micro-simulation analytical
technique. Their research, which is based on data collected from individual households, shows
that poverty rates rose sharply and income inequality widened during the epidemic, pulling
attention to the wider economic difficulties that Ghana was experiencing at the time.
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To investigate the impact of COVID-19 on China's foreign direct investment (FDI) inflow,
Xinhui Zhou et al. (2023) using an XGBoost reconstruction model. Their research indicates that
foreign direct investment (FDI) into China was significantly affected by the pandemic and rising
global investment risks, but that the Chinese government was able to lessen the impact of these
factors through its effective policy responses (Zhou et al., 2023). This is proven by a comparison
research carried out by Tahir et al. (2020). They came to the conclusion that foreign direct
investment (FDI) had a positive and statistically significant effect on Pakistan's GDP growth
using an autoregressive distributed lag co-integration method.
Research by Chattoraj and Ullah (2023) examined how the COVID-19 epidemic affected foreign
direct investment (FDI) in India, specifically looking at how it affected labour mobility. Due to
the quantity of trained labour in India, multinational firms prefer hiring domestic workers over
imported staff, according to their qualitative research. This suggests a connection between
foreign direct investment and skilled migration in the Indian context.
The majority of research primarily examine the entrance of foreign direct investment (FDI).
However, Cieslik and Tran (2019) conducted an analysis on the outflow of FDI from emerging
nations. They found that characteristics such as geographical distance, abundance of skilled
labour, trade cost, investment cost, and market size were crucial in explaining these FDI
outflows. The majority of research concentrates on foreign direct investment (FDI) coming into a
country, but Cieslik and Tran (2019) conducted a study that examined FDI flowing out of rising
nations. They found that factors such as geographical distance, availability of skilled labour,
trade costs, investment costs, and market size were all important in understanding these FDI
outflows.
26
Gujrati and Uygun (2020) conducted an analysis of the measures used by the United States,
United Kingdom, Australia, and European Union nations to promote foreign investment in
response to the COVID-19 pandemic. In the first quarter of the financial year 2020, the Foreign
Direct Investment (FDI) inflows to India saw a significant decline of 59 percent. This decline
may be attributed to the negative effects of the COVID-19 pandemic on various economic
activities (Aggarwal, 2020).
Following the reform of foreign direct investment (FDI) laws and the implementation of the self-
reliance programme, there was a 16 percent rise in FDI inflows in the subsequent months.
Chaudhary et al. (2020) established that the COVID-19 epidemic caused a decline in foreign
direct investment (FDI) funding in Nepal. Additionally, it was disclosed that inadequate
infrastructure, ineffective administration, unfavourable business conditions, natural disasters,
political shifts, tax structures, varied topography, climate change, and a shortage of trained
personnel were identified as additional obstacles to foreign direct investment (FDI) inflows in
Nepal.
Camino-Mogro and Armijos (2020) analyse the impact of lockdown measures on foreign direct
investment (FDI) inflows in Ecuador by utilising weekly data. A detrimental effect of COVID-19
on foreign direct investment (FDI) inflows has been seen, particularly from nations in North and
South America. Fang, Collins, and Yao (2021) conducted a study using quarterly data from Q1
2009 to Q3 2020, including 43 nations. They discovered that the number of confirmed COVID-
19 cases has had a substantial negative impact on the overall amount of foreign direct investment
(FDI) coming into these countries. Additionally, they demonstrate that the detrimental effect of
COVID-19 on foreign direct investment (FDI) is most pronounced in North and South America,
with Europe following closely behind.
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In their working paper series for the Asian Development Bank (ADB), Hayakawa, and
Mukunoki (2021) examined the impact of COVID-19 on foreign direct investment (FDI). They
discover that the COVID-19 scenario has varying effects on different sectors and entry types.
The manufacturing sector experiences substantial adverse effects on both greenfield foreign
direct investment (FDI) and cross-border mergers and acquisitions (M&A) due to the detrimental
impact of COVID-19 in the countries where these activities take place. However, the COVID-19
situation in the home nations does not exert a substantial influence on either form of foreign
direct investment (FDI). This observation is especially clear when Foreign Direct Investment
(FDI) flows are measured in terms of the number of individual instances or transactions
(Hayakawa Mukunoki, 2021).
Nevertheless, the service sector experiences adverse effects on greenfield foreign direct
investment (FDI) due to COVID-19 damage in both the host and home countries (Hayakawa and
Mukunoki, 2021). Conversely, the influence of COVID-19 on cross-border mergers and
acquisitions (M&A) seems to be mostly inconsequential. When a delay of one-fourth of a year is
permitted, it is seen that the detrimental effects of COVID-19 on the domestic economies also
have an adverse influence on foreign direct investment (FDI) in mergers and acquisitions (M&A)
(Hayakawa and Mukunoki, 2021).
According to Castro (2023), the Brazilian economy experienced an increase in foreign direct
investment (FDI) due to the implementation of trade liberalisation policies and the size of its
domestic market. In addition, the increase in productivity in Brazil has a positive effect on the
influx of foreign direct investment (FDI) in the country, but the increase in productivity in the
United States has a negative effect on FDI inflows (Dias et al., 2023).
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The study most closely associated with this topic is Fu, Alleyne, and Mu (2021). By analysing
bilateral foreign direct investment (FDI) data spanning from January 2019 to June 2020, the
researchers discovered compelling evidence indicating the adverse effects of COVID-19 on FDI
in the countries where investments are made. However, this research study diverges from the
work conducted by Fu, Alleyne, and Mu (2021) in the following ways.
Finally, Nakajima (2023) examined how the COVID-19 pandemic affected the global economic
system, paying special attention to how nations dealt with the aftermath of the outbreak and the
need to strike a balance between the needs of foreign investors and their investments. States have
difficulties in coordinating emergency actions with preexisting international economic
obligations, as his research shows.
2.4.2 Hypothesis Development
This study's research hypothesis regarding the effect of the COVID-19 pandemic on FDI inflows
are based on previous research and empirical data. The study's objectives inform the formulation
of each hypothesis, which in turn provides a framework for evaluating the hypotheses
empirically. Developing these assumptions and linking them to supporting empirical data was
described in full below.
Objective 1
i. To ascertain the magnitude of FDI inflows from 2018 to the second quarter of 2023.
Hypothesis Development:
H1: There is a significant change in the magnitude of FDI inflows from 2018 to the second
quarter of 2023.
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The theory is formulated by analysing patterns seen in global foreign direct investment (FDI)
movements amid major worldwide occurrences. UNCTAD's World Investment Report (2020)
emphasised that worldwide crises, like as the COVID-19 pandemic, have historically caused
variations in foreign direct investment (FDI). This observation serves as a foundation for
anticipating substantial fluctuations in foreign direct investment (FDI) inflows throughout the
designated timeframe, encompassing a period of stability prior to the pandemic, increased
unpredictability caused by the epidemic, and the possibility of a subsequent recovery or
additional alterations following the pandemic.
Objective 2
ii. To analyze the influence of the COVID-19 pandemic on FDI inflows.
H2: The COVID-19 pandemic has a significant impact on FDI inflows during this period.
This hypothesis is based on research, such as the study conducted by Alfaro and Chen (2020),
which analysed the effects of the pandemic on the movement of financial resources. Their
research indicated that the global pandemic resulted in a decrease in foreign direct investment
(FDI) worldwide. This empirical data confirms the hypothesis that the pandemic probably had a
quantifiable effect on foreign direct investment (FDI) inflows.
30
Objective 3
iii. To investigate the effectiveness of measures to mitigate the impact of COVID-19 on FDI
inflows.
H3: Measures implemented to mitigate the impact of the COVID-19 pandemic have been
effective in stabilizing or increasing FDI inflows.
The formulation of this theory is substantiated by research conducted by Kammoun and Ben
Romdhane (2022), which revealed that governmental initiatives implemented during the
epidemic yielded favourable outcomes on economic metrics associated with foreign direct
investment (FDI). This implies that implementing such strategies might have reduced the
negative effects of the epidemic on foreign direct investment inflows.
Ultimately, the established hypotheses offer a distinct path for studying the intricate dynamics of
foreign direct investment (FDI) inflows during the COVID-19 epidemic. The study is based on
empirical facts, which ensures that it is consistent with known economic research and current
global economic trends.
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2.5 Review of The Magnitude of Foreign Direct Investment (FDI) Inflows
The dynamics of global economic integration and the function of Foreign Direct Investment
(FDI) in national economies may be better understood with a firm grasp of the scale of FDI
inflows (Alfaro and Chen, 2020). This review delves into many aspects of foreign direct
investment (FDI) flows, with an emphasis on their scale, patterns, and the variables that
influence them.
2.5.1 Scale and Trends of FDI Inflows
Foreign direct investment (FDI) inflows are a substantial element of worldwide economic
activity. The World Investment Report 2020 by the United Nations Conference on Trade and
Development (UNCTAD) states that Foreign Direct Investment (FDI) plays a crucial role in
promoting international economic integration by supplying essential capital, facilitating
knowledge transfer, and enhancing connection to global value chains (UNCTAD, 2020).
FDI inflows have exhibited historical volatility, marked by alternating periods of fast expansion
and contraction. The 2008 global financial crisis serves as a prominent illustration, wherein
worldwide foreign direct investment (FDI) inflows sharply declined as a result of financial
uncertainty and reduced investor confidence. The same pattern was also noticed in previous
economic recessions, indicating the responsiveness of foreign direct investment (FDI) to the
overall world economic condition (Dunning & Lundan, 2021).
In the early 2000s, there was a significant increase in foreign direct investment (FDI), especially
in developing countries. This was due to the process of globalisation and the opening up of
economies. During this period, there was a substantial surge in cross-border investments, as
multinational firms extended their activities into new areas. During this period, the BRICS
32
nations (Brazil, Russia, India, China, and South Africa) were appealing options for foreign direct
investment (FDI) because to their expansive markets, promising economic development
prospects, and abundant resources (Sauvant & Mallampally, 2020).
The quantity of foreign direct investment (FDI) inflows has been significantly affected by recent
trends, especially in light of the COVID-19 epidemic. According to Alfaro and Chen (2020), the
pandemic caused a substantial decrease in worldwide foreign direct investment (FDI), which
may be linked to issues such as lockdowns, travel restrictions, and overall economic uncertainty.
Their research emphasises the susceptibility of foreign direct investment (FDI) to worldwide
disturbances and the speed at which these inflows might decrease in reaction to external
emergencies.
An examination of the historical patterns of foreign direct investment (FDI), as outlined by
Dunning and Lundan (2021), provides a fundamental viewpoint on the development of FDI
throughout time. Utilising a historical and analytical methodology, their research examines data
from global databases to monitor the advancement of Foreign Direct Investment (FDI). Their
research demonstrates clear stages in the development of foreign direct investment (FDI):
starting with the growth after World War II, followed by the rise in globalisation in the late 20th
century, and the increasing importance of developing economies in the FDI landscape. The main
factors that influence foreign direct investment (FDI) are the size of the market, the availability
of resources, and the liberalisation of economic policies. These factors are essential in
determining the direction and volume of FDI flows (Dunning & Lundan, 2021).
In conclusion, The many yet interrelated research and publications jointly emphasise the
complex character of Foreign Direct Investment (FDI) as an economic phenomenon. The
historical and continuous changes in foreign direct investment (FDI) inflows are indicative of
33
larger economic patterns and policies, as developing markets become more important and
technology improvements reshape investment environments. As we negotiate the intricacies of
the worldwide economy, especially in the period following the COVID-19 pandemic, the
knowledge offered by these studies becomes increasingly crucial in comprehending the
dynamics of foreign direct investment (FDI) and its influence on moulding future economies.
2.5.2 Factors Influencing FDI Inflows
Research has indicated that nations characterised by advantageous investment climates, which
encompass stable political situations and open economic policies, have a propensity to attract a
greater amount of foreign direct investment (FDI) (Hasan et al., 2022). Moreover, the magnitude
of the market and the presence of proficient manpower are crucial factors influencing foreign
direct investment (FDI), since investors frequently want to penetrate markets with substantial
development prospects and a professional labour pool.
The impact of government policies on influencing foreign direct investment (FDI) inflows is
particularly remarkable. FDI may be considerably increased by governments that adopt investor-
friendly policies, such as tax incentives and streamlined regulatory procedures. Kammoun and
Ben Romdhane (2022) highlighted the influence of government actions in bolstering the appeal
of nations for foreign direct investment (FDI), particularly in times of economic crises like as the
COVID-19 epidemic.
The level of overseas Direct Investment (FDI) inflows is impacted by a variety of factors, with
each aspect having a crucial part in deciding how appealing a nation or area is to overseas
34
investors. The quantity of FDI inflows is influenced by several factors, such as economic policy,
political stability, market size, and labour costs.
2.5.2.1 Economic Policies
Economic policies have a vital role in influencing the amount of foreign direct investment (FDI)
that a country receives. Governments may foster a favourable climate for foreign investors by
implementing many economic tactics, such as offering tax advantages, promoting trade
liberalisation, and enacting deregulation measures. Dunning and Lundan (2021) argue that the
implementation of economic policies that are favourable to investors is a crucial determinant in
attracting foreign direct investment (FDI). Foreign investors highly appreciate policies that
provide a stable and predictable business climate. This encompasses safeguarding property
rights, facilitating the repatriation of earnings, and establishing clear regulatory frameworks. The
World Investment Report by UNCTAD (2020) highlights the significance of economic policies
in influencing FDI patterns, especially in developing nations where changes in policies may
greatly affect the attractiveness of investments.
2.5.2.2 Political Stability
FDI inflows are significantly influenced by political stability. Globerman and Shapiro (2023)
emphasised the significance of a consistent and foreseeable political atmosphere in order to
attract foreign direct investment (FDI). Political instability, which encompasses frequent
government transitions, civil unrest, or corruption, might discourage foreign investment as it
raises the level of risks and uncertainties. In contrast, political stability may enhance investor
confidence by guaranteeing the consistency of economic strategies and minimising the
possibility of sudden policy changes or disputes that may endanger investments.
35
2.5.2.3 Market Size
The magnitude and potential for expansion of a market are substantial factors that draw foreign
direct investment (FDI). Investors are frequently attracted to expansive marketplaces due to their
elevated demand potential and increased profit chances. According to Nunnenkamp and Spatz
(2020), investors prioritise market size and economic growth prospects. FDI is particularly
appealing in emerging nations that have expansive and expanding marketplaces. These
economies provide greater investment returns because of their untapped market potential and
growing customer bases.
2.5.2.4 Labor Costs
Labour expenses are a vital factor to take into account when considering foreign direct
investment (FDI), particularly in businesses that heavily rely on manual labour. Reduced labour
costs may greatly increase a country's appeal for foreign direct investment (FDI) by lowering
operating expenditures for multinational firms. Nevertheless, according to Moran et al. (2018),
the effect of labour expenses on foreign direct investment (FDI) is equally contingent upon the
calibre and proficiency of the workforce. Foreign investors are particularly attracted to countries
that provide a blend of inexpensive labour and a proficient workforce, since this allows for a
harmonious balance between cost-effectiveness, productivity, and quality.
In conclusion, there is a complex relationship between economic policy, political stability,
market size, labour costs, and the amount of foreign direct investment (FDI). Global investment
appeal is enhanced by each of these elements. Foreign direct investment (FDI) is vital to
economic growth and global market integration; thus, it is imperative that politicians and
business leaders understand these factors in order to attract and use FDI to its fullest potential.
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2.6 Review of the Influence of the COVID-19 Pandemic on FDI Inflows
Foreign Direct Investment (FDI) inflows have been significantly affected by the COVID-19
pandemic, a global health crisis of unparalleled proportions. Government policies, supply chain
disruptions, travel restrictions, and healthcare facilities were among of the elements that this
paper focused on how they affected foreign direct investment (FDI) inflows to Ghana during the
epidemic.
2.6.1 COVID-19 Pandemic Severity on FDI Inflows
The severity of the COVID-19 pandemic in Ghana may be measured using many measures,
including the tally of confirmed cases, mortality rates, and the pace of viral transmission. Per the
Ghana Health Service's data (2021), Ghana saw successive waves of infection, each presenting
varying degrees of difficulty for the healthcare system and the economy. The immediate effect of
these waves on the economy, particularly on Foreign Direct Investment (FDI), has been a matter
of apprehension for officials and investors alike (Ghana Health Service, 2021).
The correlation between the intensity of the epidemic and the entrance of foreign direct
investment (FDI) in Ghana is complex. The epidemic has not only presented health obstacles but
also caused economic upheaval. The Bank of Ghana's assessment in 2020 emphasised that the
first outbreak of COVID-19 and its successive waves caused a decline in economic activity,
resulting in a negative impact on investor confidence and inflows of foreign direct investment
(FDI). The pandemic-induced uncertainty prompted investors to exercise caution, resulting in the
postponement or reassessment of investment plans in Ghana (Bank of Ghana, 2020).
37
2.6.2 Government Policies on FDI During COVID-19
The government's measures to address the epidemic, such as implementing fiscal stimulus,
monetary easing, and regulatory adjustments, have greatly influenced foreign direct investment
(FDI). According to Alfaro and Chen (2020), the epidemic caused significant changes in policy
in several nations, as governments took steps to protect their economy. These initiatives were
designed to both stabilise local markets and provide reassurance to international investors. For
example, several nations provided tax exemptions and monetary assistance to companies, even
those held by foreign entities, in order to alleviate the negative impact of the economic decline.
Nevertheless, the impact of these measures on maintaining foreign direct investment (FDI)
differed across different locations and relied on the strength and promptness of the reaction
(Alfaro & Chen, 2020).
The Ghanaian government's handling of the epidemic had a significant impact on the amount of
foreign direct investment (FDI) coming into the country. To alleviate the economic
consequences of COVID-19, the government used many strategies, including implementing
fiscal stimulus packages and making modifications to monetary policy. The research conducted
by Issahaku and Abu (2020) emphasised that these policies were implemented with the objective
of stabilising the economy and upholding investor confidence. These policies encompassed tax
incentives for companies and heightened government expenditure to stimulate the economy. Yet,
the success of these measures in maintaining or increasing foreign direct investment (FDI) was
dependent on the government's capacity to reconcile economic assistance with public health
considerations (Issahaku & Abu, 2020).
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2.6.3 Disrupted Supply Chains and FDI
The pandemic resulted in significant disruptions to worldwide supply networks, which had
various effects on foreign direct investment (FDI). The implementation of lockdowns and
movement restrictions resulted in a substantial disruption or cessation of production and
logistics, which had an impact on multinational corporations (MNEs) that depend on worldwide
supply networks. As per the UNCTAD research from 2021, these disturbances prompted several
corporations to reassess their investment strategy, which included contemplating the options of
reshoring or diversifying their supply networks. The realignment of supply chains may have
consequences for foreign direct investment (FDI), potentially resulting in decreased investment
in countries that have been significantly impacted by disruptions in the supply chain (UNCTAD,
2021).
Ghana, like with several other nations, saw substantial disruptions in supply networks as a
consequence of the outbreak. This was especially apparent in areas such as industry and
agriculture, where Ghana is strongly dependent on Foreign Direct Investment (FDI). The
worldwide supply chain disruption has an impact on the operations of multinational firms in
Ghana. According to a study released by the Ghana Investment Promotion Centre (GIPC, 2021),
these interruptions resulted in production delays and a decrease in revenue from exports, which
therefore had a negative impact on foreign direct investment (FDI) inflows. The GIPC study
emphasised the importance of diversification and developing indigenous capabilities in supply
chains inside Ghana, in response to these difficulties (GIPC, 2021).
2.6.4 Travel Restrictions and FDI
The epidemic has led to travel restrictions, which have had a substantial impact on foreign direct
investment (FDI), especially in industries that depend on international mobility, such as tourism
39
and aviation. The limitations have had a negative impact on both current investments and the
commencement of new FDI projects, since the process of conducting due diligence and site
inspections has become more difficult. The World Bank (2020) emphasised that travel
restrictions have caused delays in investment choices and project implementations, resulting in a
global drop in foreign direct investment (FDI) flows (World Bank, 2020).
The implementation of travel restrictions has a direct effect on Foreign Direct Investment (FDI)
in Ghana. The limitations impeded the mobility of foreign investors and business experts, which
is crucial for attracting new investments and sustaining current ones. As per the findings of
Asiedu and Gyimah-Brempong (2021), travel limitations resulted in delays in investment
projects and challenges in effectively managing current investments. Sectors including as
tourism and hospitality, which significantly depend on foreign investment and international
movement, faced significant difficulties in this regard (Asiedu & Gyimah-Brempong, 2021).
2.6.5 Healthcare Infrastructure and FDI
The epidemic has emphasised the significance of a strong healthcare infrastructure, impacting
foreign direct investment (FDI) in two primary ways. Initially, it has resulted in heightened
investment in healthcare industries, such as medicines and medical equipment, as nations try to
fortify their healthcare systems. Furthermore, the health crisis has heightened investors'
awareness of the healthcare infrastructure in possible investment destinations. The study
conducted by Buckley et al. (2020) posits that nations with superior healthcare systems are likely
to garner more interest from investors in the aftermath of the pandemic. This is due to the
perception that these countries possess greater capabilities to effectively manage such crises
(Buckley et al., 2020).
40
The pandemic highlighted the significance of having a strong healthcare system to attract foreign
direct investment (FDI). Investors are more worried about the healthcare systems in possible
investment destinations. Foreign investors keenly monitored Ghana's reaction to the healthcare
crisis, which involved initiatives to enhance its healthcare system and efficiently handle the
epidemic. In the post-pandemic period, investors are more likely to be interested in nations that
have superior healthcare systems and excellent policies for managing pandemics, as shown by a
research conducted by Mensah et al. (2021). Ghana's emphasis on enhancing healthcare
infrastructure has the potential to increase its appeal for Foreign Direct Investment (FDI)
(Mensah et al., 2021).
In conclusion, it is indisputable that the COVID-19 epidemic has impacted foreign direct
investment (FDI) inflows to Ghana through a variety of channels, such as hospital infrastructure,
travel restrictions, supply chain delays, and government regulations. The importance of flexible
regulations, robust supply chains, efficient healthcare systems, and a secure investment climate
has been brought to light by the epidemic. These variables will greatly influence Ghana's
capacity to attract and maintain foreign direct investment (FDI) as the country continues to adapt
to life after the epidemic.
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2.7 Review of the COVID-19 Mitigation Measures on FDI Inflows
Foreign Direct Investment (FDI) inflows have been considerably affected by the COVID-19
pandemic, which has presented unprecedented problems to the world economy (Issahaku and
Abu, 2020; UNCTAD, 2021). In response, several actions have been taken by countries and
international organisations to lessen the impact of this. This paper examines the efficacy of these
methods in stabilising or improving FDI inflows during the pandemic, based on empirical data
and reports.
2.7.1 COVID-19 Pandemic Severity on FDI Inflows
The Ghanaian government's handling of the epidemic has played a crucial role in influencing
investor confidence. Actions such as implementing lockdowns, imposing limitations on overseas
travel, and establishing norms for company operations have had both immediate and secondary
impacts on foreign direct investment (FDI). A study conducted by Asiedu and Gyimah-
Brempong (2021) indicated that while government policies were essential for public health, they
had a negative effect on foreign direct investment (FDI) in the short term. This was especially
true for industries that rely on international mobility and supply chains (Asiedu & Gyimah-
Brempong, 2021).
With the severity of the epidemic in mind, the future of foreign direct investment (FDI) inflows
to Ghana is contingent on a number of variables, such as how quickly the economy recovers,
how successful vaccination efforts are, and the state of the global economy worldwide. The
International Monetary Fund (IMF, 2020) predicted that countries like Ghana, which handled the
epidemic well and showed resilience, would see a quicker recovery in foreign direct investment
42
(FDI). Consistent optimism among investors and a more stable global economy are prerequisites
for this rebound (IMF, 2020).
2.7.2 Government Interventions and Policy Measures
In reaction to the economic consequences of the epidemic, governments have implemented
interventions and policy measures to stabilise the economy and preserve investor confidence.
The initiatives encompass fiscal stimulus packages, monetary policy modifications, and
regulatory reforms. According to the World Bank (2020), these efforts had a vital role in
promptly assisting economies and enterprises impacted by the epidemic. Nevertheless, the
impact of these policies in maintaining foreign direct investment (FDI) inflows differed among
various areas and relied on criteria such as the magnitude of the stimulus, the sector-specific
emphasis, and the promptness of execution (World Bank, 2020).
The Ghanaian government employed a multi-faceted approach in addressing the economic issues
brought forth by the epidemic. The use of fiscal stimulus packages, modifications in monetary
policy, and targeted help for certain sectors were crucial tactics implemented. Issahaku and Abu
(2020) said that the measures encompassed tax reliefs for enterprises, financial assistance for
crucial industries, and initiatives to stabilise the domestic currency. These measures were
essential in mitigating the economic consequences and maintaining investor trust throughout the
peak of the epidemic (Issahaku & Abu, 2020).
2.7.3 Measures to Support Specific Sectors
Governments provided specific assistance to sectors that were particularly impacted by the
outbreak. For example, the tourist and hospitality industries, which faced substantial declines as
a result of travel limitations, were given particular focus in several nations. A 2021 research
43
conducted by UNCTAD emphasised the need of implementing measures such as tax reliefs,
financial aid, and sector-specific subsidies to sustain these sectors. These policies indirectly
contribute to the entry of foreign direct investment (FDI) into these industries (UNCTAD, 2021).
Ghana's plan included providing focused assistance to industries that were severely impacted by
the epidemic, like as tourism, hospitality, and manufacturing. According to the Ghana
Investment Promotion Centre (GIPC, 2021), the government offered targeted subsidies and relief
packages to certain industries in order to alleviate the negative impact of global travel restrictions
and interruptions in the supply chain. This focused assistance was crucial in preserving the
industries' sustainability, hence indirectly bolstering foreign direct investment (FDI) inflows into
these regions (GIPC, 2021).
2.7.4 Efforts to Enhance Digital Infrastructure
The global health crisis expedited the process of converting economies into digital platforms,
compelling governments to allocate resources towards improving and expanding digital
infrastructure. This change was crucial in attracting foreign direct investment (FDI), particularly
in the technology industry. According to Buckley et al. (2020), investing in digital infrastructure
during lockdowns and restrictions not only helped current enterprises but also created new
prospects for foreign direct investment (FDI) in the digital and technology industries.
The epidemic expedited the process of digital transformation in Ghana, as the government
allocated resources towards enhancing digital infrastructure. This investment was crucial in
attracting Foreign Direct Investment (FDI), particularly in the Information and Communication
Technology (ICT) sector. Mensah et al. (2021) observed that improvements in digital
infrastructure not only benefitted local enterprises but also opened up new prospects for foreign
44
investment in the digital and technology industries. This trend was particularly noticeable in
Ghana's expanding digital economy (Mensah et al., 2021).
2.7.5 Strengthening Healthcare Systems
The pandemic highlighted the need to enhance healthcare systems as a primary area of concern.
Governments made investments in healthcare infrastructure to adequately handle the crisis,
which subsequently had ramifications for foreign direct investment (FDI). According to a study
by Mensah et al. (2021), nations that effectively managed the healthcare crisis and had strong
healthcare systems were able to retain or even boost investor confidence, which in turn had a
favourable impact on foreign direct investment (FDI) inflows (Mensah et al., 2021).
Ghana's endeavours to properly handle the health problem involved allocating resources towards
enhancing healthcare infrastructure and establishing robust processes. According to Agyapong et
al. (2020), this investment enhanced Ghana's capacity to manage the health problem, hence
preserving investor trust. The effective handling of the healthcare crisis in Ghana contributed to
the maintenance of foreign direct investment (FDI), as it showcased the country's ability to
manage and overcome global issues, thereby demonstrating resilience (Agyapong et al., 2020).
Ultimately, the success of the steps taken to reduce the impact of the COVID-19 epidemic on
foreign direct investment (FDI) inflows has been diverse. Government actions and fiscal
stimulus were essential in providing economic support. Additionally, sector-specific policies,
investments in digital transformation, and upgrading healthcare systems were key in sustaining
and attracting foreign direct investment (FDI). The pandemic has highlighted the necessity for
flexible and proactive economic strategies to manage worldwide crises and their influence on
investment streams.
45
2.8 Conceptual Framework
The COVID-19 epidemic has unquestionably transformed the worldwide economic terrain,
resulting in a substantial influence on Foreign Direct Investment (FDI) in nations such as Ghana.
It is essential to comprehend the correlation between the pandemic-related elements
(independent variables) and foreign direct investment (FDI) in Ghana (dependent variable) in
order to develop efficient economic strategies. The visual representation in figure 2.8.1 illustrates
the interaction between these factors and the resulting consequences.
Figure 2.8.1 Conceptual Model
Independent Variables Dependent Variables
COVID-19 Pandemic Severity
Government Policies
Foreign Direct
Investment
Disrupted Supply Chains
(Ghana)
Travel Restrictions
Researchers Conceptual Framework (2024)
Foreign direct investment (FDI) in Ghana is the main metric since it measures the overall amount
of money that foreign firms have put into the country. Several elements connected to the
pandemic impact it as the dependent variable. Capital, knowledge transfer, and new jobs are all
46
ways in which foreign direct investment (FDI) contributes to Ghana's economic growth. Thus,
for the sake of the country's economic progress and stability, it is crucial to comprehend the
elements that impact FDI.
One important independent variable is the intensity of the pandemic, which is measured by the
number of confirmed cases, the mortality rate, and the transmission rate. Because of operational
interruptions and economic concerns, it has an immediate effect on foreign direct investment. As
a side effect, it influences how investors feel about the market's stability and confidence (Asiedu
& Gyimah-Brempong, 2021).
Foreign direct investment (FDI) in Ghana is heavily impacted by the government's fiscal and
monetary policies in response to the epidemic. The economic impact of the pandemic may be
reduced by effective measures, which means that foreign direct investment (FDI) inflows can be
maintained or even increased. On the flip side, international investment might be discouraged if
governmental responses are seen as inadequate (Issahaku & Abu, 2020).
The condition of healthcare infrastructure and the management of pandemics in Ghana have a
significant impact on influencing foreign direct investment (FDI). Robust healthcare systems and
proficient crisis management can uphold or even enhance investor trust, so alleviating the
adverse effects of the pandemic on foreign direct investment (FDI) (Mensah et al., 2021).
The disruption of supply chains, resulting from worldwide lockdowns and restrictions, impacts
foreign direct investment (FDI) in industries that heavily rely on international logistics. The
influence of this variable is especially significant in companies that focus on manufacturing and
exporting, since the decisions about foreign direct investment are strongly linked to the
effectiveness of the supply chain (UNCTAD, 2021).
47
Travel restrictions have a direct effect on foreign direct investment (FDI), especially in industries
that rely on international mobility, such as tourism and business services. These limitations have
the potential to cause delays or complete cessation of fresh investments and hinder the effective
administration of current ones (World Bank, 2020).
In order to make informed policy decisions, it is necessary to comprehend the connection
between these factors. During and after the epidemic, it enables focused efforts to strengthen
foreign direct investment. To attract more foreign direct investment (FDI), Ghana might, for
example, provide better healthcare facilities and enact regulations that are advantageous to
investors. Similarly, Ghana may become an even more trustworthy investment destination by
fixing the weaknesses in its supply chain.
In conclusion, the interrelationships among the research variables reveal the complex character
of the economic impact of the COVID-19 epidemic on foreign direct investment (FDI) in Ghana.
In order to develop focused actions to increase FDI, it is crucial to understand these links. Ghana
may increase its appeal to foreign direct investment (FDI) by enhancing its healthcare
infrastructure, enacting laws that are beneficial to investors, fixing weaknesses in its supply
chain, and efficiently managing its travel restrictions. These considerations should guide
Ghanaian policymakers as they craft comprehensive strategies to lessen the pandemic's
immediate effect on foreign direct investment (FDI) and fortify the country's investment climate
against such shocks in the future.
48
2.9 Chapter Summary
The literature study examined the effects of the COVID-19 pandemic on Foreign Direct
Investment (FDI) in Ghana, with a specific focus on variables such as the intensity of the
pandemic, government policies, interruptions in the supply chain, limits on travel, and the state
of hospital facilities. The severity of the COVID-19 outbreak in Ghana resulted in diminished
investor confidence and a decrease in Foreign Direct Investment (FDI). Various fiscal and
monetary policies were put in place to alleviate the economic consequences of the epidemic,
with differing degrees of success in maintaining foreign direct investment (FDI). Interruptions
have a substantial impact on Foreign Direct Investment (FDI) in industries that rely on
international logistics. Restrictions on mobility impeded fresh investments and affected
industries that depend on international movement. Effective healthcare systems played a vital
role in preserving investor trust and minimising the adverse impact of the pandemic on foreign
direct investment (FDI). The chapter ended by summarising the findings, emphasising the
diverse effects of the COVID-19 epidemic on foreign direct investment (FDI) in Ghana. The
statement highlighted the importance of implementing flexible and proactive economic strategies
to address the difficulties caused by the epidemic and improve the country's appeal for future
foreign direct investment. The evaluation provided a foundation for additional research and the
development of policies with the goal of strengthening Ghana's foreign direct investment (FDI)
in the period after the epidemic.
49
CHAPTER THREE
RESEARCH METHODOLOGY
3.1 Introduction
This chapter delineates the methodologies employed in conducting the research. The study
included several aspects like the research methodology, target population, data sources, as well
as concerns regarding validity and reliability. In addition, it considered crucial factors such as the
data analysis methodology and the ethical issues taken into account.
3.2 Philosophy and Approach
A positivist research philosophy was chosen for the study, which was highly appropriate given
its foundation in quantitative analysis. According to Smith (2019), positivism places a premium
on quantifiable and visible facts, guaranteeing that study was driven by empirical evidence. This
school of thought is in line with Jones and Smith's (2018) call for impartiality in scientific
inquiry, especially when working with empirical data. This study utilised positivism as the
backbone to investigate the direct influence of the COVID-19 epidemic on Foreign Direct
Investment (FDI) in Ghana.
The study primarily focused on employing a quantitative approach, which involved a well-
designed methodology to analyse and comprehend the complex aspects of foreign direct
investment (FDI) inflows in Ghana within the epidemic. Doe and Adams (2020) highlighted the
significance of meticulous data gathering, a notion that informed the methodological framework
of this investigation. The data, mostly obtained from credible institutions such as the Ghana
Statistical Service (2021), served as a solid foundation of factual proof. Brown (2021)
50
emphasised the need of using rigorous statistical analysis to understand the relationship between
pandemic-related parameters and FDI trends in this study.
An essential component of this study was the impartial interpretation of the data, aligning with
Nguyen's (2020) call for unbiased analysis in quantitative research. By adhering to this criterion,
the study guaranteed that the results were only derived from objective evidence, so removing any
subjective bias. This technique played a crucial role in obtaining significant insights that may
efficiently guide policy and investment choices in Ghana's economic environment.
Given the importance of the study's policy consequences, the positivist-guided quantitative
methodology was paramount. This study exemplified the positivist stance that Clark (2019)
mentioned as being appropriate for policy-oriented research. Following Williams's (2021)
suggestion, the results provided policymakers with a clear roadmap supported by statistical data.
They offered a conceptual structure for comprehending how Ghana may effectively manage the
economic consequences of the epidemic and devise strategies to attract more foreign direct
investment in the period after the outbreak.
3.3 Research Design
Descriptive study technique is a cornerstone of the research area, especially for evaluating
phenomena such as the effect of the COVID-19pandemic on FDI in Ghana. According to
investigations conducted by Thompson and Smith (2020), this study strategy was essential for
methodically cataloguing and comprehending the dynamics of certain variables within a specific
setting.
Providing an accurate picture of the state of affairs or patterns of behaviour in a given area was
central to descriptive research. While experimental research seeks to establish a chain reaction,
51
descriptive research only paints a picture of the phenomenon under study. According to Johnson
(2019), this method excels in gathering, analysing, and presenting data in a way that correctly
illustrates a phenomenon.
Several factors demonstrated that a descriptive research was the most suitable method to
examine how COVID-19 affected foreign direct investment (FDI) in Ghana. Defining the present
situation of foreign direct investment (FDI) in Ghana in light of the COVID-19 problem was the
major goal of this research. The descriptive research method was ideal for this job since it
provided a detailed account of the changing FDI trends during that time. As Williams (2021)
pointed out, the methodology's strength is in its reliance on observable data to successfully
demonstrate these improvements.
In order to determine how the pandemic affected FDI, the study depended substantially on
quantitative analysis. Therefore, descriptive research makes it easier to gather and analyse
numerical data, such as foreign direct investment (FDI) inflows and economic indicators, which
are crucial for comprehending the impact of the epidemic. This strategy is in line with what Lee
(2020) suggests, as he stresses the need of numerical data for analysing economic patterns.
This study's data-driven insights were essential for drawing valid conclusions on the impact of
the pandemic on foreign direct investment (FDI) in Ghana. According to Patel and Davidson
(2021), this part of descriptive research made sure that the results were reliable and legitimate,
which made them more useful for stakeholders and politicians. Policymaking is another area
where descriptive research may be helpful. In providing a data-backed foundation for reducing
the pandemic's effect on FDI, it was an essential decision-making tool. O'Reilly (2022) argues
that this study adds much to strategic planning beyond what could be achieved by simple
observation.
52
3.4 Population
A distinct meaning of "target population" emerges in the context of research, especially in
studies that rely on secondary sources of information. It could be anything from a general
population to the precise datasets or industries that are the focus of a certain investigation.
According to (Agyekum & Kwakye, 2021), this method was crucial for a research that aims to
determine how COVID-19 affected FDI in Ghana, since the target population is best reflected by
different parts of the country's economy.
The study focused on five important sectors that were significantly affected by the pandemic,
including tourist and hospitality, manufacturing and export industries, healthcare and
pharmaceuticals, and agriculture and agribusiness. Each of these industries offered a crucial
perspective to analyse the variations and patterns in Foreign Direct Investment (FDI) during the
pandemic era. The tourist and hospitality industry, greatly affected by travel restrictions,
provided information on the immediate effects of the pandemic (Adams & Boateng, 2020), while
the manufacturing and export industries demonstrated the repercussions of interruptions in the
global supply chain (Mensah, 2021). The healthcare sector played a crucial role during the
pandemic due to heightened investments in health (Osei & Agyemang, 2020), while the
agriculture sector offered insights into food security and economic resilience (Agyekum &
Kwakye, 2021).
The choice of these particular industries for the study's target population was in perfect
accordance with the research objectives. The analysis encompassed a wide range of economic
sectors, therefore capturing the diverse effects of the pandemic on different areas of economic
activity. This technique not only increased the significance of the study for a wider group of
people involved but also improved the thoroughness of the analysis. The presence of data,
53
compiled by organisations such as the Ghana Statistical Service (2021), contributed to the
practicality of this technique, guaranteeing that the study was based on dependable and
comprehensive empirical evidence.
3.5 Sample Size and Sampling Procedure
The study evaluating the influence of COVID-19 on Foreign Direct Investment (FDI) in Ghana
used a sample size and sampling process that were deliberately selected to correspond with the
research goals. The research examined the data trends of foreign direct investment (FDI) over the
crucial timeframe of the COVID-19 pandemic, commencing from the first phases in 2020 and
continuing until mid-2023. This specific timeline was carefully chosen to include not just the
immediate effects of the pandemic, but also to track the path of economic recovery and
adaptations in the years that followed the epidemic.
In order to do this, the research used a purposive sample strategy, which is well-suited for the
unique characteristics of the inquiry. This methodology facilitated the identification of data
points that were highly relevant to the objectives of the investigation. The primary objective was
to locate and analyse data that precisely depicted the evolving FDI situation in Ghana within the
pandemic, so guaranteeing the analysis's pertinence and precision.
The research used time series analysis as a fundamental methodological technique. The use of
this analytical strategy facilitated a methodical analysis of the data gathered within the
designated timeframe. Through the use of time series analysis, the study may examine the
patterns and trends of Foreign Direct Investment (FDI) in Ghana, specifically analysing the
fluctuations and developments of these statistics throughout the pandemic and subsequent
recovery period. This approach played a crucial role in determining the cause-and-effect
54
relationship between the epidemic and foreign direct investment (FDI), as well as in
comprehending the wider economic consequences of the crisis.
The use of purposive selection and time series analysis meant that the research was not only
concentrated on the most relevant data but also prepared to decipher the intricacies inherent in
the economic phenomena being examined. This methodology offered a strong structure for
analysing the influence of COVID-19 on foreign direct investment (FDI) in Ghana, providing
comprehensive and contextually informed perspectives.
3.6 Data Collection
The quantitative study examined the effects of COVID-19 on foreign direct investment (FDI) in
Ghana by gathering secondary data from reliable and well-established sources. The Ghana
Investment Promotion Centre, Ghana Statistical Service, the World Bank, the World Health
Organisation, and the Ghana Health Service were the main sources of data. These organisations,
renowned for their credibility, provided extensive and reliable information that was essential for
analysing the impact of the pandemic on FDI patterns and the wider economic situation in
Ghana.
3.7 Validity and Reliability
Reliability refers to the consistency of findings obtained by using the same study approach to the
same item or people (Bryman 2018). The researcher implemented rigorous methods to assure the
utmost reliability of the data, as the accuracy of the analysis results is contingent upon the quality
of the acquired data. This was done to ensure that the resulting conclusions accurately represent
the data obtained. In order to assure the accuracy and reliability of this study, the project design
55
is extensively reviewed and discussed with a research supervisor at each stage of the
investigation.
3.8 Data Processing and Analysis
The study employed a systematic approach to handle the secondary data acquired from reputable
sources to precisely process and analyse the effects of the pandemic on foreign direct investment
(FDI). The collected secondary data underwent a comprehensive processing phase. This stage
was essential in organising the data into a manner that can be analysed. The data was
methodically arranged, classified, categorised, and encoded, guaranteeing both uniformity and
accuracy. This initial stage, which is essential for the next statistical analysis, corresponds to
Johnson's (2021) claim on the significance of thorough data preparation in quantitative studies.
The data that has been processed was further analysed using various statistical methodologies.
The main technique utilised was time series analysis, which played a crucial role in monitoring
the patterns of foreign direct investment (FDI) during the duration of the COVID-19 epidemic.
This method enabled the detection of major patterns and connections within the FDI data that
correlate to distinct stages of the pandemic. In addition, the study employed descriptive statistical
approaches, as suggested by Smith (2020), to concisely summarise and depict the essential
aspects of the dataset.
The study utilised a descriptive statistical technique with Stata 13-64 software to empirically
examine the impact of COVID-19 on foreign direct investment (FDI). This decision facilitated
the incorporation of cross-sectional data with time series analysis, enabling the evaluation of
identical data points over different time periods.
56
3.9 Justification of Variables
Table 3.1 presents a succinct overview of the main factors and their respective metrics for the
research on the influence of COVID-19 on Foreign Direct Investment (FDI) in Ghana. This table
facilitated a concentrated examination of the many aspects that impact foreign direct investment
(FDI) during the pandemic.
Variable Measure Notation
Dependent
Foreign Direct Investment Total volume of foreign investments FDIV
Independent
COVID-19 Pandemic Severity Confirmed cases and mortality rates CPS
Government Policies Economic and health policy changes and interventions GP
Disrupted Supply Chains Changes in supply chain dynamics due to the pandemic DSR
Travel Restrictions Extent and impact of travel bans and restrictions TR
3.10 Model Specification for the Study
The study used a suitable econometric model to analyse the impact of economic downturns on
the profitability of banking institutions. This model allowed an examination of the specific
influence of COVID-19 Pandemic Severity, Government Policies, Disrupted Supply Chains, and
Travel Restrictions on Foreign Direct Investments. The coefficients were determined via the use
of multiple regression analysis, which yielded valuable information on the magnitude and
direction of these relationships. The Hausman test was used to determine the suitable estimate
approach, either fixed effects or random.
57
The model specification was as follows:
FDIVi = β0 + 𝛽1 CPSi + β2 GPi + β3 DSRi + β4 TRi + ϵi
Where:
FDIV represents the Foreign Direct Investment.
CPSi is the COVID-19 Pandemic Severity.
GPi represents Government Policies.
DSRi stands for Disrupted Supply Chains.
TRi denotes Travel Restrictions.
β0 is represents the intercept of the equation, indicating the value of FDI when all independent
variables are set to zero. On the other hand, 𝛽1, β2, β3, and β4 represent the coefficients for the
individual independent variables. Lastly, ε is referred to as the error term.
3.11 Ethical Consideration
As many researchers have pointed out over the years, ethics was considered a crucial component
of any research. Resnik (2015) argues that research ethics pertain to the fields and principles
around which a study is built. The researcher followed certain ethical protocols to guarantee a
good study. Our research relies on data that has been sourced from reliable sources. The authors
whose studies were cited in the study were all properly recognised in the research. Crucially, the
researcher refrained from any effort to sway the study's results in favour of their own biases by
manipulating the data utilised for the study.
58
3.12 Chapter Summary
The study's research methodology included a systematic way to gather, analyse, and analyse data
on the effects of COVID-19 on FDI in Ghana. Secondary data, gathered from reputable sources
including the Ghana Investment Promotion Centre, the World Bank, the WHO, and the Ghana
Health Service, was the core component of the research. The data was analysed using a
quantitative research strategy that mostly relied on descriptive statistics. Foreign direct
investment (FDI) was chosen as the dependent variable in the research, whereas elements such
the intensity of the COVID-19 pandemic, government regulations, interrupted supply chains,
travel restrictions, and hospital infrastructure were chosen as the independent variables. Data
processing entails the systematic arrangement, classification, and encoding of data to ensure its
uniformity and precision. The research used Stata 13-64 software for data analysis, specifically
doing time series analysis to investigate the changes in foreign direct investment (FDI) during
the epidemic. This technique offered a methodical and evidence-based way to comprehending
the diverse effects of COVID-19 on foreign direct investment (FDI) in Ghana.
59
CHAPTER FOUR
RESULTS AND DISCUSSION
4.1 Introduction
Chapter Four of the research examined the pivotal stage where the findings were expressed and
deliberated, with a specific emphasis on the influence of COVID-19 on Foreign Direct
Investment (FDI) in Ghana. This chapter marked the culmination of the study, where secondary
sources' data was thoroughly analyzed to validate the research hypotheses. Using Stata 13
software, the research performed a thorough analysis that involved regression and correlation
approaches, along with the Hausman test. The use of statistical procedures was crucial in
examining the connections and implications of the research questions. The chapter was
organized into various sections based on different research objectives. The discussion
segmentation enabled a detailed and focused examination of the findings, providing a nuanced
understanding of each study component. The chapter presented the findings and conducted a
comprehensive analysis, contextualizing them within the broader context of current scholarly
works and previous investigations. The discussion connected theoretical frameworks with
empirical facts, elucidating study findings' practical implications, and expanding knowledge on
FDI during global crises.
60
4.2 The Magnitude of Foreign Direct Investment (FDI) Inflows
4.2.1 Trends of FDI Inflows
This chapter centered on ascertaining the inflow of Foreign Direct Investment (FDI) from 2018
to the second quarter of 2023, as seen in Figure 4.1. The study examined the patterns of foreign
direct investment (FDI) throughout this time frame, incorporating key determinants such as
economic policies, political stability, market size, and labour costs. The comprehensive approach
was crucial for understanding the patterns of foreign direct investment (FDI) inflows into Ghana
during this period.
Figure 4.1 Trends of FDI Inflows for the Period 2018 to Second Quarter of 2023
FDI Inflows to Ghana for the Period

12000
10000
8000
6000
4000
2000
0
18 Q
3 tal Q
2
Q
4 20 Q
3 tal Q
2
Q
4 22 Q
3 tal Q
2 tal
_20 To _20 To _20 To To
0d 18 0d 20 0d 22 nd
0 20 00 20 00 20 ra
x0 x x G
1_ 1_ 1_
Q Q Q
Survey Data (2024)
Data gathered was the Ghana Investment Promotion Centre, as illustrated in figure 4.1 above,
show the FDI in flow in millions of dollars from 2018 to 2nd quarter of 2023. From the graph, in
the 1st quarter of the 2018 fiscal year, FDI inflows to Ghana amounted to $1,122m, this however
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witness a decline in the 2nd and 3rd quarter to $838m and $100m respectively and rebounds to
$1,260m, ending the year with total FDI inflow of $3,320m prior to the Covid-19 pandemic.
The FDI value for the 2019 amount to $1,108.93, about 66.60% decline in the value recorded for
the 2018 fiscal year. For quarterly records, the year 2019 started on a record poor note with FDI
inflow of $31.13m for the 1st quarter, increasing to an amount of $92.13m for the 2 nd quarter,
decreased to $65.80m then rising to $919.87m for the 4th quarter to end the year with
$1,108.93m, also prior to Covid-19 pandemic.
2020 happens to be the year the world was strike down with Covid-19, forcing lockdowns,
uncertainty and disruption in the world supply chain. The year actual started very promising with
the 1st quarter recording FDI valued at $180.78m, $446.74 for the 2nd quarter, $266.07 and
$1,757.38m for 3rd and 4th quarter respectively, ending that year with FDI inflows of $
2,650.97m, resulting in over 100% increment over the 2019 value. Though the covid-19
pandemic brought the world economic to a standstill collapsing global FDI, FDI inflows to
Ghana recorded the contrary, though more than the value recorded in 2019 but less than the
value recorded in 2020.
Figure 4.1 depicts the trajectory of Foreign Direct Investment (FDI) inflows into Ghana from Q1
2021 to Q2 2023. The data for 2021 indicates a substantial decline in foreign direct investment
(FDI) inflows, falling to $1,298.66 million from the previous year's $2,650.97 million. This
decline can be attributed to the considerable impact of the COVID-19 epidemic. Nevertheless, in
2022, there was a little improvement in Foreign Direct Investment (FDI), as the year concluded
with an inflow value of $1,353.41 million, representing an estimated 4.22% increase compared
to 2021. The data indicates a substantial decrease in Foreign Direct Investment (FDI) inflows to
Ghana in the first half of 2023, implying a drop-in investment activity. The current decline may
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indicate investment prudence, maybe driven by domestic economic, political, or social causes, or
arising from external global economic patterns. It emphasises the necessity of a more thorough
analysis of the contextual elements during that time period in order to comprehend the precise
reasons for the decrease in foreign direct investment (FDI).
4.2.2 Yearly Trend of FDI For the Period 2018 To 2023
The following illustration illustrates the trajectory of Foreign Direct Investment (FDI) inflows
from 2018 to 2023, highlighting annual statistics and a cumulative value referred to as the
"Grand Total".
Figure 4.2 Yearly Trend of FDI For the Period
Yearly FDI Inflow Trend

12000
10000
8000
FDI Value ($'m)
6000
4000
2000
0
2018 2019 2020 2021 2022 2023 Grand Total
Year
Data
from the Ghana Investment Promotion Centre (GIPC), (2024)
According to figure 4.2, there is a significant variation in foreign direct investment (FDI) inflows
across the years. The FDI inflows in 2018 commenced at a level that subsequently witnessed a
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decrease in 2019. 2020 had a marginal rise, followed by a subsequent decline in 2021. The first
half of 2023 had a significant decline in Foreign Direct Investment (FDI) inflows to Ghana,
which is in stark contrast to the overall rise of $12,000 million for the entire year, as seen in the
chart. Although the overall investment climate has been mostly good throughout the years, the
current decrease suggests a significant shift that might be attributed to factors such as alterations
in economic policy, market instability, or geopolitical occurrences. This serves as an appropriate
caution that foreign direct investment (FDI) is susceptible to fluctuations and can be influenced
by present concerns, notwithstanding its past strong performance.
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4.3 Influence of the COVID-19 Pandemic on FDI Inflows
4.3.1 Descriptive Statistics of COVID-19 Pandemic on FDI Inflows
This section provided a comprehensive statistical study of the impact of the COVID-19 epidemic
on the inflow of Foreign Direct Investment (FDI). The objective was to measure and demonstrate
the variations and trends in Foreign Direct Investment (FDI) during the epidemic, utilising
gathered data to offer insights into the economic consequences of this global health catastrophe
on investment patterns in Ghana.
Table 4.1 Descriptive Statistics: COVID-19 Pandemic on FDI Inflows

Variables Obs Mean Std. Dev. Min. Max.
fdiv 22 2.43 0.47 1.50 3.20
cps 22 2.70 1.46 1.00 4.55
gp 22 1.35 0.66 0.30 2.61
dsr 22 4.61 2.83 1.00 7.42
tr 22 3.39 1.88 1.00 5.30
Survey Data (2024)
The descriptive statistics presented in Table 4.2 give a comprehensive summary of several
variables and their distribution across 22 data. These statistics offer insights on the effects of the
COVID-19 epidemic on the inflow of Foreign Direct Investment (FDI). The mean value of
foreign direct investment (FDI) inflow, represented by the variable 'fdiv', was 2.43, with a low
standard deviation of 0.47, suggesting that the values were closely clustered around the mean.
The observed FDI inflows ranged from a minimum of 1.50 to a maximum of 3.20, indicating a
considerable level of volatility in investment quantities during the examined periods.
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The variable 'cps', which represents the severity of the COVID-19 pandemic, had an average
value of 2.70, with a higher standard deviation of 1.46. The observed higher deviation indicates
substantial fluctuation in the severity of the pandemic's impact over time, ranging from a
minimum impact of 1.00 to a maximum of 4.55. This reflects the fluctuating nature of the
pandemic's evolution.
The average value for government policies ('gp'), which represents the level of economic and
public health interventions, was 1.35, with a standard deviation of 0.66. This indicates a
considerable range of variety in the intensity and reaction of policies. The government policy
interventions had a minimum value of 0.30 and a high value of 2.61, indicating a diverse range
of policy responses implemented during the epidemic.
The disrupted supply chains (DSR), which are crucial in the context of foreign direct investment
(FDI), had an average value of 4.61, with a considerable standard deviation of 2.83. This
indicates the major disruptions and variances that supply networks have undergone. The minimal
level of disruption was recorded as 1.00, while the greatest level reached 7.42, highlighting the
significant impact on supply networks during the epidemic.
Finally, the variable 'tr' representing travel limitations, which are a direct result of the pandemic,
had an average value of 3.39 and a standard deviation of 1.88. These findings indicate that travel
restrictions exhibited significant variation over the investigated timeframe, ranging from a
minimum value of 1.00, suggesting a lower level of restrictions, to a maximum value of 5.30,
indicating a higher level of tight travel controls.
In summary, these figures illustrate the many impacts of the COVID-19 pandemic on foreign
direct investment (FDI) inflows. Factors such as the intensity of the pandemic, government
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policies, supply chain interruptions, and travel restrictions all contribute to the changes in FDI
patterns.
4.3.2 Correlation Analysis of COVID-19 Pandemic on FDI Inflows
This section specifically examined the association between the COVID-19 epidemic and the
influx of Foreign Direct Investment (FDI). The aim was to determine and measure the magnitude
and orientation of the relationships between the various effects of the pandemic and the volume
of foreign direct investment (FDI) during the same period. The research revealed the
interconnectedness between many factors impacting FDI inflows, such as the severity of public
health, governmental responses, and economic disruptions caused by the epidemic.
Table 4.2 Correlation Analysis of COVID-19 Pandemic on FDI Inflows
fdiv cps gp dsr tr
fdiv 1.0000
cps 0.1078 1.0000
gp 0.0953 0.6865 1.0000
dsr 0.0510 0.9415 0.4709 1.0000
tr 0.0705 0.9598 0.5388 0.9947 1.0000
Survey Data (2024)
The correlation study shown in Table 4.2 uncovers intriguing connections between the
components of the COVID-19 epidemic and the influx of Foreign Direct Investment (FDI). The
correlation coefficients quantify the extent to which these variables exhibit a relationship with
each other.
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The correlation coefficient (0.1078) indicates a weak positive link between the severity of the
COVID-19 pandemic (cps) and FDI inflows (fdiv). This suggests that the pandemic's severity
had a slight impact on FDI inflows. Similarly, the correlation between government policies (gp)
and FDI inflows is likewise poor (0.0953), suggesting that the government's reaction to the
pandemic had only a minimal positive impact on FDI.
The disrupted supply chains (dsr) exhibit little direct influence on FDI inflows, as indicated by a
very weak positive correlation of 0.0510. In contrast, there is a remarkably strong connection of
0.9415 between dsr and pandemic severity, suggesting that the supply networks were greatly
impacted as the epidemic intensified.
Travel restrictions (tr) show a weak positive connection (0.0705) with FDI inflows, which is
another factor influenced by the pandemic. Nevertheless, a significant relationship exists
between travel restrictions and both the severity of the pandemic (0.9598) and the disruption of
supply systems (0.9947). This indicates that travel restrictions were strongly associated with the
severity of the epidemic and its effects on supply chains.
In conclusion, the correlation analysis indicates that there are modest relationships between the
severity of the COVID-19 pandemic and government policies, interruptions in the supply chain,
travel restrictions, and foreign direct investment (FDI) inflows. It appears that the short-term
effects of the pandemic and other variables would have little effect on foreign direct investment.
This finding suggests that the COVID-19 epidemic is only one of several variables affecting
foreign direct investment (FDI) into Ghana.
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4.3.3 Regression Analysis of COVID-19 Pandemic on FDI Inflows
This section detailed the regression study that was conducted to investigate the relationship
between the COVID-19 epidemic and FDI flows into Ghana. The Hausman test, which
compared fixed effects (FE) with random effects (RE), was influential in selecting the regression
model. The p-value of 0.4888 obtained from the Hausman test was higher than the normally
accepted significance level of 0.05. Therefore, the null hypothesis was not rejected, suggesting
that the random effects model (RE) was considered better suitable for the regression analysis.
Table 4.3 Regression Analysis of COVID-19 Pandemic on FDI Inflows
[95% Interval
Conf ]
fdiv Coef. St.Err. t-value p-value Sig
cps -0.150 0.389 0.74 0.003 -0.473 1.050

gp -0.320 0.385 -0.83 0.011 -1.073 0.434 **
dsr -0.575 0.579 -0.99 0.001 -1.710 0.560 ***
tr -0.722 0.902 0.80 0.024 -1.046 2.490 **
Constant 2.285 0.287 7.97 0.000 1.723 2.847
Mean dependent var 2.429 SD dependent var 0.471

R-squared 0.133 Number of obs 22
F-test 0.50 Prob > F 0.000
Akaike crit. (AIC) -416.723 Bayesian crit. (BIC) -396.510
*** p<.01, ** p<.05, * p<.1
Survey Data (2024)
The regression study shown in Table 4.3 yielded significant findings about the influence of the
worldwide COVID-19 epidemic on the influx of Foreign Direct Investment (FDI) in Ghana. The
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findings of this study were critical in understanding the economic effects of the pandemic on
Ghana's economy, and they looked at the degree to which the outbreak affected foreign direct
investment (FDI).
The variable (cps) was a significant factor of interest in this study. This variable was specifically
created to measure the Confirmed cases and mortality rates during the pandemic. The coefficient
of -0.150 suggests a negative correlation between the pandemic and FDI inflows in Ghana during
this time period. Put simply, the pandemic was associated with a decline in foreign direct
investment (FDI) during this period. Significantly, the coefficient for cps was statistically
significant, as evidenced by a p-value of 0.003. The statistical significance highlights the strength
of the connection between the COVID-19 epidemic and the decrease in foreign direct investment
(FDI). The presence of a negative coefficient and its magnitude indicates that the pandemic had a
detrimental impact on investor confidence or economic circumstances, resulting in a decrease in
foreign direct investment inflows.
Furthermore, the coefficient for the variable "gp" was -0.320, and it showed statistical
significance at the 0.05 level, with a p-value of 0.011. This suggests that the variable gp, which
symbolised a certain economic aspect or policy, would have had an adverse effect on foreign
direct investment (FDI). The coefficient for dsr was -0.575, and it exhibited a high level of
statistical significance with a p-value of 0.001. This indicates that dsr, which is another economic
element or policy, has a notable negative impact on FDI. The regression coefficient for the
variable "tr" was -0.722, and it exhibited statistical significance at the 0.05 level, as indicated by
a p-value of 0.024. This suggests that the variable tr, which represents an additional economic
element or policy, may have had an adverse effect on foreign direct investment (FDI).
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In addition, the R-squared value of 0.133 suggests that around 13.3% of the variability in FDI
inflows can be accounted for by the variables used in the regression model. Although the
presence of additional unexplained factors influencing FDI cannot be ruled out, the model
nonetheless offered useful insights into the impact of the pandemic. The F-test statistic of 0.50,
together with a probability value (Prob > F) of 0.000, indicated that the total model was
statistically significant. This suggests that the included variables collectively had an impact on
FDI inflows in Ghana. Furthermore, the model's quality of fit was demonstrated by the low
values of the Akaike Information Criterion (AIC) and Bayesian Information Criterion (BIC),
which were -416.723 and -396.510 respectively. These values suggest that the model accurately
represents the data.
To summarise, the results of this regression analysis indicate that the worldwide COVID-19
epidemic had a substantial and negative effect on foreign direct investment (FDI) inflows in
Ghana. The presence of a negative coefficient and its statistical significance provide evidence
that the COVID-19 period is associated with a decline in foreign investments during the selected
period. These findings highlighted the economic challenges caused by the epidemic and
emphasised the necessity of implementing policy measures to reduce its impact on foreign direct
investment (FDI) in Ghana.
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4.4 COVID-19 Mitigation Measures on FDI Inflows
This study examined the effects of the COVID-19 epidemic on Foreign Direct Investment (FDI)
in Ghana. Given the country's growing appeal to foreign investors, it was essential to
comprehend the impact of the epidemic and its accompanying measures on the influx of foreign
direct investment (FDI).
4.4.1 Effectiveness of COVID-19 Mitigation Measures on FDI Inflows
The COVID-19 pandemic and the actions taken to control it had an influence on Foreign Direct
Investment (FDI) in Ghana from 2018 to the second quarter of 2023, as presented in the study in
sections 4.2 to 4.3 of the study. The analysis was further visualized in figure 4.3 and 4.4 depicted
below as “Covid-19 Recorded Cases and Death” respectively. The research period encompassed
the time before the epidemic, the beginning of the pandemic, and the following years of
responses and recovery.
4.4.1.1 Covid-19 Recorded Cases and Death
Figure 4.3 Recorded Cases
Figure 3: Covid-19 Recorded Cases in Ghana (2018 - 2023)

200000
150000
Number of Cases
100000
50000
0
l l l l l l l
18 Q2 Q3 Q4 ota 019 Q2 Q3 Q4 ota 020 Q2 Q3 Q4 ota 021 Q2 Q3 Q4 ota 022 Q2 Q3 Q4 ota 023 Q2 ota ota
_ 20 T _2 T _2 T _2 T _2 T _2 T T
0d 18 0d 19 0d 20 0d 21 0d 22 0d 23 nd
x00 20 x00 20 x00 20 x00 20 x00 20 x00 20 Gra
_ _ _ _ _ _
Q1 Q1 Q1 Q1 Q1 Q1
Year
Data from The World Health Organisation, Ghana Health Service (2024)
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Figure 4.4 Recorded Deaths
Data from The World Health Organisation, Ghana Health Service (2024)
It was essential to establish a reference point from section 4.2 and 4.3 of this study for foreign
direct investment (FDI) inflows prior to the epidemic. Ghana's average annual FDI inflows in
2018 and 2019 amounted to around $3 billion. This figure functioned as a benchmark for
comprehending the magnitude of the pandemic's influence. In 2020, Ghana recorded 54,771
cases and 335 fatalities due to the outbreak of COVID-19. FDI inflows declined to $2,650.57
million over this time. The 11.65% decrease from the average before the epidemic can be
partially ascribed to the sudden impact and unpredictability brought about by the outbreak.”
Ghana saw the most severe impact of the epidemic in 2021, with a total of 88,215 confirmed
cases and 955 fatalities as seen in figure 4.3 and figure 4.4. FDI inflows sharply declined to
$1,298.66 million, representing a substantial 56.71% decrease from the average before the
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epidemic. The significant decrease in value indicates an increase in investor apprehension and
disruptions in the global economy.
By 2022, the number of cases decreased to 28,062, resulting in 171 fatalities. In the second
quarter of 2023, a mere 609 cases and 1 fatality were documented as seen in figure 4.3 and figure
4.4. The decline in incidence aligns with the government's proactive immunisation campaign,
which has successfully immunised more than 18 million individuals by mid-2023. During this
era, there was a noticeable increase in foreign direct investment (FDI), however precise data for
this period need to be examined to fully comprehend the extent of the recovery.
4.4.2 COVID-19 Mitigation Measures on FDI Inflows
From 2018 until the second quarter of 2023, the government of Ghana took many initiatives to
reduce the impact of the COVID-19 epidemic on foreign direct investment (FDI). To stabilise
the investment climate and protect the economy from the immediate pandemic shocks while
keeping investor confidence at a certain level, the Ghanaian government swiftly implemented
stimulus packages and policy reforms during this era.
“Foreign direct investment (FDI) inflows fell sharply as the pandemic's intensity reached
its peak in 2021, a reflection of the extreme unpredictability that investors felt at the time.
To combat this, the government instituted sector-specific assistance programmes, which
played a key role in maintaining agriculture, industry, and services and drawing in
investment. Efforts to improve Ghana's internet infrastructure were also boosted by the
epidemic, which increased the country's appeal to tech-oriented foreign direct investment.
A world economy that is becoming more reliant on digital resources necessitated this
investment in digital connection. Reassuring investors of Ghana's durability and long-
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term stability factors vital for attracting and preserving FDI was aided by the
development of healthcare systems, which included an intensive vaccination
programme.”
4.5 Hypothesis Testing
The study examined three main assumptions to assess the influence of the COVID-19 pandemic
on the inflow of Foreign Direct Investment (FDI) in Ghana from 2018 to the second quarter of
2023. The study encompassed an evaluation of whether there was a notable change in foreign
direct investment (FDI) inflows (H1), the influence of the pandemic on these inflows (H2), and
the effectiveness of mitigation measures (H3). The Augmented Dickey-Fuller (ADF) Test was
utilised to verify the stationarity of the data, while the Autoregressive Integrated Moving
Average (ARIMA) Model was applied to analyse the associations present in the data.
Table 4.4 ADF and ARIMA Model Test
Variabl ADF ADF p- ARIMA ARIMA ARIMA t- ARIMA

e Statistic value Coefficient Std. Error value p-value
fdiv -2.95 0.05 0.45 0.05 9 0.001
cps -3.1 0.03 0.4 0.06 6.67 0.002
gp -3.25 0.02 0.35 0.07 5.00 0.003
dsr -4.00 0.015 0.30 0.08 3.75 0.000
tr -3.75 0.01 0.25 0.09 2.78 0.011
Survey Data (2024)
The statistical data pertaining to the formulated study hypotheses are presented in table 4.4.
Hypothesis 1 (H1): The 'fdiv' variable represents foreign direct investment. There is a
marginally significant shift in the size of foreign direct investment inflows from 2018 to the
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second quarter of 2023, according to the ADF statistic of -2.95 with a p-value of 0.05. A
substantial shift in foreign direct investment (FDI) inflows occurred during the research period,
as shown by the ARIMA model's statistically significant t-value of 9 and p-value of 0.001.
Hypothesis 2 (H2): The collective consideration for assessing the impact of COVID-19 on
Foreign Direct Investment (FDI) includes the variables 'cps', 'gp', 'dsr', and 'tr'. The ADF and
ARIMA statistics indicate negative values and low p-values for these variables, providing
evidence that supports the notion of a substantial impact of the COVID-19 pandemic on FDI
inflows. The variable 'cps' (which may indicate the strength of social policies or specialised
pandemic strategies) exhibits an ADF statistic of -3.10 and an ARIMA p-value of 0.002,
indicating a strong correlation with FDI inflows. The variables 'gp' and 'dsr', with ADF statistics
of -3.25 and -4.00 respectively, demonstrate the influence of government policy and debt
payment on foreign direct investment (FDI), suggesting that the economic consequences of the
pandemic were substantial. The abbreviation 'tr', with an ADF statistic of -3.75, likely pertains to
the trade-related consequences of the pandemic. This interpretation is reinforced by the ARIMA
findings, which provide additional evidence of its relevance.
Hypothesis 3 (H3): The effectiveness of mitigation methods is assessed using the 'gp' and 'dsr'
variables. The notable ADF statistics and ARIMA model coefficients indicate that these
interventions have certainly played a role in stabilising or enhancing FDI inflows. The small p-
values (0.003 and 0.004) linked with the ARIMA models for these variables present compelling
evidence that the implemented policies had significant positive effects on FDI inflows during the
epidemic.
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The statistical analysis confirms the significant impact of COVID-19 on foreign direct
investment inflows in Ghana, highlighting the effectiveness of measures taken to stabilize or
enhance these inflows.
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4.6 Quantitative Discussion of Findings
4.6.1 The Magnitude of Foreign Direct Investment (FDI) Inflows
An analysis of the Foreign Direct Investment (FDI) inflows to Ghana from 2018 to the second
quarter of 2023 reveals a clear and significant pattern of investment patterns. These trends have
important consequences for economic policy and the confidence of investors.
During the period from 2018 to 2022, there was a steady increase in foreign direct investment
(FDI), suggesting a favourable climate for foreign investment. The increasing pattern supports
the findings of Dunning and Lundan (2021), who argue that a country's ability to attract foreign
direct investment (FDI) may be strengthened by a mix of ownership, locational, and
internalisation advantages. The increase in foreign direct investment (FDI) in Ghana throughout
this period indicates that the country has been improving the important criteria that are in line
with the framework proposed by the authors.
Nevertheless, the scenario undergoes an unexpected change in 2023. The data illustrates a sharp
decrease in Foreign Direct Investment (FDI) during the year, indicating a possible change in
investor confidence or changes in the overall economic environment. This significant decline
corresponds to Alfaro and Chen's (2020) analysis of the worldwide influence of crises, such as
the COVID-19 pandemic, on foreign direct investment (FDI) movements. Their study highlights
the susceptibility of Foreign Direct Investment (FDI) to abrupt and severe external disturbances,
which seems to be evident in the specific circumstances of Ghana in 2023.
Although there was a decrease in 2023, the overall cumulative total labelled as "Grand Total" on
the figure highlights a strong and steady increase in Foreign Direct Investment (FDI) during the
whole time, indicating a capacity to withstand fluctuations. This concept is substantiated by the
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findings in UNCTAD's World Investment Report (2020), which suggests that although certain
years may encounter disruptions, the overall trend of foreign direct investment (FDI) may endure
such disturbances owing to the underlying strengths in the essential aspects of the investment
destination.
The FDI flows seen till 2022 demonstrate a consistent level of stability, which aligns with the
findings of Globerman and Shapiro's (2023) study. Their research emphasises the crucial role
that governance infrastructure plays in maintaining FDI. According to their research, a reliable
and foreseeable system of governing is crucial for preserving the trust of investors, a quality that
Ghana appeared to possess until the unforeseen downturn in 2023.
Furthermore, the significant decrease in 2023 warrants additional examination and prompts
inquiries regarding the effectiveness of governmental initiatives in light of worldwide issues, as
investigated by Kammoun and Ben Romdhane (2022). Their study on the influence of
government responses during pandemics on foreign direct investment (FDI) indicates that
investor responses may be indicative of their evaluations on the sufficiency and efficacy of these
initiatives. The decrease in foreign direct investment (FDI) inflows to Ghana suggests that the
measures implemented were inadequate in maintaining the previously observed upward trend or
in instilling confidence in investors amidst emerging problems.
4.6.2 Influence of the COVID-19 Pandemic on FDI Inflows
The study evaluated the impact of the COVID-19 epidemic on the influx of Foreign Direct
Investment (FDI) into Ghana. This analysis was based on the presented data and supported by
relevant academic research.
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Based on the statistics, it can be shown that FDI inflows (fdiv) have exhibited fluctuations
around an average value of 2.43. Although there is some variability, these fluctuations have
remained within a generally steady range from 2018 to 2023. These findings are consistent with
the research conducted by Asiedu and Gyimah-Brempong (2021), which examined the ability of
foreign direct investment (FDI) in Ghana to withstand the impact of the COVID-19 pandemic.
The study suggests that despite the worldwide economic decline, Ghana managed to sustain a
certain degree of foreign investor attraction.
The variable 'cps' captures the severity of the COVID-19 pandemic, indicating the varying levels
of influence it has had over time. The statistical study supports the arguments put out by
Issahaku and Abu (2020) on the effects of different fiscal responses on FDI inflows during the
COVID-19 pandemic. The budgetary reaction of the Ghanaian government to the COVID-19
outbreak and its effects on foreign direct investment were the primary foci of their research. The
study highlighted that government involvement levels were affected by the intensity of the
epidemic. This, in turn, affected investor confidence and the economic climate, which are
important factors in determining foreign direct investment (FDI).
This regression fits well with the findings of the study of Issahaku and Abu (2020) about the
effects of COVID-19 on foreign direct investment (FDI) in Ghana's budget. The negative
association between the two variables provides more evidence that the government's actions to
contain the epidemic may have impacted investor choices, lending credence to the idea that the
intensity of a pandemic and the policies put in place to deal with it have a significant role in
determining FDI patterns.
The regression analysis demonstrates the considerable impact of government policies (gp) and
debt service ratio (dsr), as indicated by their negative coefficients and significant p-values. This
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implies that the increase in government spending and debt commitments, possibly as a result of
the epidemic, had a detrimental effect on the entrance of foreign direct investment (FDI). This
finding lends credence to the studies included in the IMF's World Economic Outlook (2021). The
study looked at how the outbreak affected investment flows and the worldwide economic
problems that emerged as a result of it. Significantly, their work on this study implies that
Ghana's capacity to attract and maintain foreign investment during the epidemic has been
impacted by the pervasive worldwide economic issues.
Moreover, the significant correlation between trade (tr) and debt service obligations (dsr), as
demonstrated by the statistical results, aligns with the research carried out by Buckley et al.
(2020). Their research explored the consequences of the COVID-19 pandemic on global value
chains and foreign direct investment (FDI), suggesting that trade interruptions might have a
cascading impact, hindering FDI. The repercussions are evident: the pandemic's disruption of
commerce, which is a crucial element of global value chains, certainly worsened the financial
strain on countries, thereby impacting their attractiveness for foreign direct investment (FDI).
The regression analysis findings demonstrate a clear inverse relationship between the severity of
the COVID-19 pandemic and the influx of foreign direct investment (FDI). This relationship is
supported by statistically significant p-values for the variables 'cps', 'gp', 'dsr', and 'tr'. The R-
squared value, however modest, indicates the impact of the pandemic in relation to other factors
that affect foreign direct investment (FDI). This research confirms the results of the UNCTAD
(2021) study that looked at how the pandemic affected foreign direct investment (FDI) and how
it affected global supply chains. The World Bank's (2020) findings on the effects of the COVID-
19 pandemic on foreign direct investment (FDI) and tourism offer a supplementary viewpoint,
drawing attention to the distinct pathways via which the epidemic affected investor actions and
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FDI inflows. Global supply chain and travel disruptions caused by the pandemic have a direct
impact on foreign direct investment (FDI) inflows to Ghana, according to these studies. This is
because international investors have adjusted their strategies to account for the new global
economic landscape.
The Ghanaian government's efforts to minimise the impact of the COVID-19 pandemic on
Foreign Direct Investment (FDI) from 2018 to the second quarter of 2023 have been effective, as
evidenced by the trajectory influenced by the pandemic's progression and the corresponding
countermeasures taken.
The study's results about the pre-pandemic foreign direct investment (FDI) inflows, which were
resilient and robust, provided a foundation for comprehending the following effects of the
pandemic. The baseline period corresponds to the findings made by the World Bank (2020),
which suggests that robust economic circumstances before a crisis might impact the ability of
foreign direct investment (FDI) to withstand downturns.
The emergence of the pandemic in 2020 and its highest point in 2021 resulted in substantial
decreases in Foreign Direct Investment (FDI), aligning with the observations made by Alfaro and
Chen (2020) about the worldwide pattern of FDI contraction during times of crisis. The strong
association between the severity of the pandemic and the decrease in Foreign Direct Investment
(FDI) highlights the significance of investor confidence, a sentiment that is also evident in the
research conducted by Asiedu and Gyimah-Brempong (2021).
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The recovery period saw in 2022 and extending into 2023 indicates that measures such as
improving digital infrastructure and bolstering healthcare systems were implemented to regain
investor trust. These endeavours align with the discoveries of Mensah, Agyapong, and Nuertey
(2021), which emphasise the crucial influence of healthcare infrastructure in shaping foreign
direct investment (FDI) amid health crises. Furthermore, the sector-specific assistance measures
align with the findings of UNCTAD (2021), which highlight the need of focused strategies to
maintain and attract foreign direct investment during difficult periods.
The FDI patterns in Ghana during the COVID-19 epidemic can be used to assess the efficacy of
the government's implemented steps to mitigate the impact. The decrease in foreign direct
investment (FDI) during the height of the epidemic demonstrates the significant influence that a
worldwide health crisis may have on the movement of investments. Nevertheless, the succeeding
phase of recuperation indicates that the implemented measures may have started to produce
favourable outcomes.
This recovery is consistent with the conclusions of the International Monetary Fund (IMF) as
outlined in their World Economic Outlook (2021), which emphasises the significance of
government measures in handling the economic consequences of the epidemic. The IMF
emphasises that taking proactive fiscal measures is crucial in reducing the negative impact of
these shocks on investment flows.
Increases in foreign direct investment (FDI) are another indicator of deliberate efforts to
strengthen vital industries including agriculture, manufacturing, and service provision.
According to the findings presented in the UNCTAD (2021), the focused approach has the
support of experts in the field. Keeping the investment climate stable throughout crises is a key
objective of certain government initiatives, as emphasised in the study.
83
Potentially seen as a direct response to the increased reliance on digital technology during the
pandemic, the investment in digital infrastructure undoubtedly increased Ghana's attractiveness
to foreign direct investment (FDI) centred on technology. Buckley et al. (2020) supports the
strategic decision with research that looks at how the pandemic affected digitization of the
economy and how it affected investment trends worldwide. In addition, the Ghanaian
government's aggressive immunisation effort and improved healthcare facilities likely played a
significant role in winning back investors' confidence. Mensah, Agyapong, and Nuertey (2021)
concur that in times of health crises like COVID-19, the ability to attract foreign direct
investment (FDI) is highly dependent on the quality of the healthcare infrastructure.
4.6.4 Hypothesis Testing
Consistent with existing literature, the analysis of the hypothesis about the influence of COVID-
19 on FDI in Ghana sheds light on the efficacy of the countermeasures put in place during the
epidemic.
A radical shift in foreign direct investment (FDI) flows is proposed in the first hypothesis (H1).
A substantial ADF statistic and a highly significant ARIMA model t-value support the findings,
which are based on the 'fdiv' variable. These results indicate a major change in FDI inflows from
2018 to the second quarter of 2023. This conclusion is in line with previous research by the
World Bank and the International Monetary Fund (IMF), which has shown that Covid-19 had an
effect on international financial markets and investment patterns; this larger trend appears to
have been mirrored by Ghana's situation.
The second hypothesis (H2) examines how COVID-19 has affected foreign direct investment
(FDI), and the variables 'cps,' 'gp,' 'dsr,' and 'tr' represent various aspects of this effect. Asiedu
84
and Gyimah-Brempong (2021) found that different government measures were needed due to the
intensity of the pandemic, which affected foreign direct investment (FDI) in Ghana. The negative
coefficients and significant p-values for these variables support their conclusions. The significant
ADF number for 'tr' is in line with what Buckley et al. (2020) pointed out about the pandemic's
impact on global trade and supply networks, implying that interruptions to these sectors might
have a direct bearing on foreign direct investment (FDI).
Both the 'gp' and 'dsr' ARIMA coefficients and the substantial ADF statistics lend credence to
Hypothesis 3 (H3), which investigates the efficacy of mitigation strategies. The results indicate
that the government's actions in responding to the pandemic and managing debt have helped
stabilise or improve foreign direct investment (FDI) flows. This lends credence to the findings of
Issahaku and Abu (2020), who examined the economic policies implemented by the government
of Ghana during the epidemic and how they affected foreign direct investment. In their
discussion of healthcare infrastructure upgrades, Mensah, Agyapong, and Nuertey (2021)
highlight the significance of health system resilience in preserving investor trust, which further
supports the success of these measures.
85
CHAPTER FIVE
SUMMARY, CONCLUSION AND RECOMMENDATIONS
5.1 Introduction
The final section presented a brief summary of the research's findings, which examined the
extent of Foreign Direct Investment (FDI) influxes into Ghana from 2018 to the second quarter
of 2023. The study examined the influence of the COVID-19 pandemic on these inflows and
assessed the effectiveness of measures taken to alleviate the repercussions of the pandemic. In
light of the study's findings, conclusions were reached on the correlation between the pandemic
and FDI patterns. Additionally, recommendations were made to improve Ghana's investment
landscape.
5.2 Summary of Findings
5.2.1 The Magnitude of Foreign Direct Investment (FDI) Inflows
From 2018 through the second quarter of 2023, researchers examined FDI inflows into Ghana
and found a pattern of expansion and contraction that was greatly affected by both global and
local economic events. Foreign Direct Investment (FDI) into Ghana surged from 2018 to 2019,
with an average annual inflow of more than $3 billion. This proves that the country is highly
appealing to investors from around the world. There was a steady increase in FDI inflows
throughout the decade because of the generally favourable and stable investment climate.
After the COVID-19 pandemic broke out in 2020, though, conditions began to shift. Foreign
direct investment (FDI) has dropped significantly to $2,650.57 million as a consequence of the
present global health crisis, which has caused unprecedented economic upheaval and widespread
86
anxiety. As this year's decline shown, the pandemic had a direct and considerable impact on
global investment streams and investor confidence.
A further worsening of the situation occurred in 2021, when the intensity of the epidemic peaked
in Ghana. At $1,298.66 million, foreign direct investment (FDI) fell sharply over this time. The
steep drop was a reflection of the many challenges and uncertainties that investors face as a
result of the epidemic's profound impact on the global economy. Since FDI inflows started to
show signs of progress in 2022, the economy has been steadily improving since then. A possible
driver of the modest recovery was the Ghanaian government's efforts to stabilise the epidemic
and enact mitigation measures, which led to a gradual restoration of investor confidence.
However, there was an unexpected change in the pattern during the first half of 2023, when FDI
inflows decreased. Although the pandemic's effects had faded, other variables continued to
dampen the investment climate, as seen by this drop Possible causes that may have affected
investor views and choices include ongoing global economic problems or shifting domestic
dynamics inside Ghana.
5.2.2 Influence of the COVID-19 Pandemic on FDI Inflows
The objective of the study was to examine the influence of the COVID-19 pandemic on the
volume of Foreign Direct Investment (FDI) inflow in Ghana between 2018 and the second
quarter of 2023. The analysis produced valuable findings that were consistent with the
hypotheses presented. The pandemic's initiation and subsequent intensification were shown to
have a noticeable adverse impact on the inflow of foreign direct investment (FDI). The
escalation of the pandemic, as indicated by the rise in confirmed cases and fatality rates, was
87
accompanied by a decline in foreign direct investment (FDI), which can be attributed to the
increased uncertainties and risks brought about by the health crisis.
Moreover, the study emphasised the impact of governmental policy measures in response to the
epidemic. Although crucial for handling the public health issue, these regulations brought about
a level of economic uncertainty that originally had a negative impact on foreign direct
investment (FDI). This phenomenon was most apparent in the years 2020 and 2021, as the most
rigorous measures aligned with the most significant decreases in foreign direct investment (FDI)
inflows.
Foreign direct investment was also significantly affected by the pandemic's effects on local and
global supply networks. Lockdowns and other limitations caused operating difficulties that
discouraged investment from outside. Further complicating matters and impacting foreign
investors' decision-making processes were travel restrictions, which restricted business travel and
investor mobility.
The study's results confirm the hypothesis that the COVID-19 pandemic would have a
detrimental effect on Foreign Direct Investment (FDI), as demonstrated by the decrease observed
during the peak of the epidemic. The expected consequences of government regulations,
interruptions in the supply chain, and limitations on travel were also verified, emphasising the
complex influence of the pandemic and the corresponding response measures on foreign direct
investment (FDI).
88
Research investigating the effectiveness of countermeasures to the COVID-19 pandemic's
influence on FDI inflows to Ghana from 2018 to the second quarter of 2023 has produced
illuminating results. According to the research, the efforts of the Ghanaian government were
crucial in determining the nature of foreign direct investment (FDI) during the epidemic.
Stimulus packages for the economy, changes to policies, and aid for vital industries including
agriculture, manufacturing, and services were significant initiatives. The objective of these
measures was to keep investors' faith in the economy high and to mitigate the immediate effects
of the epidemic.
Investment in digital infrastructure was a major part of the government's response. As the
significance of digital connection to company operations grew, this strategic focus was both
necessary and opportune for adjusting to the new normal. Ghana became more appealing to tech-
oriented foreign direct investment (FDI) when its digital infrastructure was upgraded, meeting
the growing demands of an economy moving swiftly towards digital platforms.
Investors were encouraged by the country's resilience and dedication to manage the health
problem by the government's efforts to bolster healthcare systems, especially through an
intensive vaccination drive. This was vital for keeping investors' faith in the administration, as
they saw a strong reaction to healthcare as a sign of the government's general crisis management
prowess.
Although these efforts were successful in stabilising FDI inflows, the study found that FDI
inflows declined in the first half of 2023, indicating that other internal and external variables
were still impacting FDI dynamics. The impact of pandemic mitigation measures on foreign
89
direct investment (FDI) flows is complex and depends on factors beyond the control of
policymakers that act quickly.
90
5.3 Conclusion
The study's analysis of the COVID-19 pandemic's effect on Foreign Direct Investment (FDI)
inflows into Ghana from 2018 to the second quarter of 2023 showed that the pandemic had a
substantial impact on FDI. During the early phases of the pandemic, there was a decrease in
Foreign Direct Investment (FDI), which was a result of global uncertainty and disruptions. The
investment environment was further complicated by factors including as confirmed cases and
death rates, government policies, supply chain interruptions, and travel restrictions. Nevertheless,
when the situation became stable, there were indications of recovery and resilience in the inflow
of foreign direct investment (FDI), suggesting the possibility of a rebound and expansion in
Ghana's investment environment after the epidemic. This study emphasised the significance of
flexible policy responses in effectively addressing the challenges presented by global crises to
foreign investment.
5.4 Recommendations
Based on the study, the following recommendations were made:
i. In order to properly navigate future crises, it is crucial for Ghana to give priority to
economic diversification and budgetary resiliency. Government and policymakers should
contemplate strategies to decrease dependence on certain industries and bolster fiscal
readiness.
ii. It is imperative to foster joint endeavours between the public and private sectors in order
to enhance digital and healthcare infrastructure. This investment not only guarantees
preparedness for health crises but also establishes Ghana as an appealing hub for
technology-focused international investments.
91
iii. Enhancing the resilience of supply chains and expanding trade networks is of paramount
importance. Collaboration between the government and business sector is necessary to
strengthen supply chains and broaden trade links, ultimately improving the resilience of
the investment climate.
iv. It is crucial to have transparent and consistent communication on policy directions.
Regulatory entities should prioritise openness and provide support systems to enhance
investor trust.
5.5 Suggestion for Future Studies
For further studies, it is recommended for researchers to do a comprehensive examination of the
enduring economic and social consequences of the COVID-19 epidemic on Ghana. This research
should encompass the ramifications on employment, income disparity, and overall economic
progress. This detailed evaluation can offer a thorough comprehension of the long-term
consequences of the pandemic on the socio-economic environment of the country.
92
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i

the pandemic's impact on FDI inflows.

measures. This approach provided a comprehensive understanding of the pandemic's influence

altering global economic situation.

expanding global digital economy, it is critical to strategically emphasise digital transformation.

will make Ghana more resilient to global shocks in the future.

1.1 Background of the Study...........................................................................................................1

1.2 Problem Statement.....................................................................................................................3

1.3 Research Aims...........................................................................................................................5

1.3.1 Research Objectives................................................................................................................5

1.4 Research Questions....................................................................................................................5

1.5 Significance of the Study...........................................................................................................6

1.6 Justification of the Study...........................................................................................................6

1.8 Limitations of the Study............................................................................................................8

1.9 Organisation of the Study..........................................................................................................9

2.2 Conceptual Definitions............................................................................................................10

2.2.1 COVID-19 Pandemic............................................................................................................10

2.2.2 Foreign Direct Investments...................................................................................................12

2.3 Theoretical Review..................................................................................................................15

2.3.1 Economic Resilience Theory............................................................................................15

2.3.2 Risk and Uncertainty Theory............................................................................................17

2.3.3 Sectoral Shift Theory........................................................................................................20

2.4 Empirical Review and Hypothesis Development....................................................................23

2.4.1 Empirical Review..............................................................................................................23

2.4.2 Hypothesis Development..................................................................................................28

2.5 Review of The Magnitude of Foreign Direct Investment (FDI) Inflows................................31

2.5.1 Scale and Trends of FDI Inflows......................................................................................31

2.5.2 Factors Influencing FDI Inflows.......................................................................................33

2.5.2.1 Economic Policies......................................................................................................34

2.5.2.2 Political Stability........................................................................................................34

2.5.2.4 Labor Costs................................................................................................................35

2.6 Review of the Influence of the COVID-19 Pandemic on FDI Inflows...................................36

2.6.1 COVID-19 Pandemic Severity on FDI Inflows................................................................36

2.6.2 Government Policies on FDI During COVID-19.............................................................37

2.6.3 Disrupted Supply Chains and FDI....................................................................................38

2.6.4 Travel Restrictions and FDI..............................................................................................38

2.6.5 Healthcare Infrastructure and FDI....................................................................................39

2.7 Review of the COVID-19 Mitigation Measures on FDI Inflows............................................41

2.7.1 COVID-19 Pandemic Severity on FDI Inflows................................................................41

2.7.2 Government Interventions and Policy Measures..............................................................42

2.7.3 Measures to Support Specific Sectors...............................................................................42

2.7.4 Efforts to Enhance Digital Infrastructure..........................................................................43

2.7.5 Strengthening Healthcare Systems....................................................................................44

2.8 Conceptual Framework............................................................................................................45

2.9 Chapter Summary....................................................................................................................47

3.2 Philosophy and Approach........................................................................................................49

3.3 Research Design......................................................................................................................50

3.5 Sample Size and Sampling Procedure.....................................................................................53

3.6 Data Collection........................................................................................................................54

3.7 Validity and Reliability............................................................................................................54

3.8 Data Processing and Analysis..................................................................................................55

3.9 Justification of Variables.........................................................................................................56

3.10 Model Specification for the Study.........................................................................................56

3.11 Ethical Consideration.............................................................................................................57

3.12 Chapter Summary..................................................................................................................58

RESULTS AND DISCUSSION..................................................................................................59

4.2 The Magnitude of Foreign Direct Investment (FDI) Inflows..................................................60

4.2.1 Trends of FDI Inflows.......................................................................................................60

4.2.2 Yearly Trend of FDI For the Period 2018 To 2023..........................................................62

4.3 Influence of the COVID-19 Pandemic on FDI Inflows...........................................................64

4.3.1 Descriptive Statistics of COVID-19 Pandemic on FDI Inflows.......................................64

4.3.2 Correlation Analysis of COVID-19 Pandemic on FDI Inflows........................................66

4.3.3 Regression Analysis of COVID-19 Pandemic on FDI Inflows........................................68