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Abstract
Background: Foreign Direct Investment (FDI) provides more than just capital; it introduces technology and managerial expertise, contributing significantly to economic growth. However, corruption, measured by the Corruption Perceptions Index (CPI), deters inflows. This study examines how Ghana’s CPI relates to FDI, with institutional quality and political stability as mediators accounting for GDP, inflation, and exchange rates as covariates.
Methods: A non-experimental quantitative design that adopts a multivariate deductive approach is used to test the theoretical propositions, and uses data from 1995 to 2022. CPI data are sourced from Transparency International, FDI from the IMF, and institutional quality and political stability from the Worldwide Governance Indicators. Covariates (GDP, inflation, real exchange rate) are sourced from the World Bank. The study employed the PROCESS Procedure by Andrew F. Hayes' mediation analysis to estimate the coefficient of the total, direct, and indirect relationship between CPI and FDI, testing hypotheses via Scott’s Institutional Theory and International Political Economy frameworks. Assumptions of linearity, normality, and homoscedasticity were verified.
Results: Improvements in CPI significantly increase FDI inflows (total effect: coeff = .4920, p = .0059), whereas institutional quality strongly mediates this relationship (indirect effect: .1691, significant), enhancing FDI by fostering a stable investment climate. While GDP positively influences FDI, Political stability’s mediating role is minimal (indirect effect: .0155, insignificant).
Conclusions: Addressing corruption boosts FDI in Ghana, with institutional quality as a key mediator over political stability. Policymakers should prioritize institutional reforms and macroeconomic stability to attract investment. Future research should explore qualitative dimensions and comparative analyses to deepen understanding.
Publication Date
2025
Keywords
Corruption Perceptions Index (CPI), Foreign Direct Investment (FDI), Institutional Quality, Political Stability, International Political Economy
Disciplines
Economic Policy | Public Administration | Public Policy
Is Part Of
VCU Graduate Research Posters