The Impact of Financial Liberalization on Private Investment in Ghana
The International Journal of Business and Finance Research, Vol. 7(4) p. 77-90 (2013)
Posted: 18 May 2013
Date Written: 2013
Ghana’s financial sector policies have largely been influenced by changes in global economic thoughts. Prior to the 1980s when it was fashionable in the development literature to advocate for interventionist policies, the country’s financial system was heavily regulated beyond the mere enforcement of contracts and fraud preventions. Later in the 1980s when the new orthodox became the order of the day, the country once again began a major policy experiment with these policies. The objective of this study is to examine the effects of the financial sector reforms on private investment in Ghana. To achieve this, a simple econometric model was developed and estimated using data from 1980-2007. It came out from the study that private investment responded marginally to the financial liberalization policies in Ghana. The general conclusion of the study is that financial liberalization will not have favorable effects on private investment unless foreign and unproductive assets such as cash and gold are channeled to the banking sector in developing countries.
Keywords: Financial Engineering, Investment, Interest Rates, Financial Deepening, Liberalization, Economic Growth
JEL Classification: G11, G21, F62
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