This is crucial because, to the best of our knowledge, existingstudies on the determinants of economic growth in Ghana (see Oteng-Abayie &Frimpong, 2006;Sakyi,2011;Sakyi&Adams,2012;Adu,2013;Asiedu,2013;Insah, 2013) have not considered the role played by this interaction. Therefore,our study differs significantly from previous ones as; (i) it introduces the interaction between FDI and trade openness variables3to test the Bhagwati hypothesis,(ii) it is drawn from the endogenous growth literature, and (iii) it disaggregatesthe capital stock into domestic capital (i.e., domestic investment) and foreigncapital (i.e., FDI). By way of estimation method, we opt for the autoregressivedistributed lag (ARDL) bounds testing approach to cointegration by Pesaran, Shin,and Smith (2001) which produces valid results even with a small sample size as inour case.
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