Openness and Agricultural Performance in Ghana

The paper examined the relationship between openness and agricultural performance using data covering the period 1995 to 2009. Representing openness as foreign direct investment (FDI) and trade openness, the results showed that there is no long run relationship between FDI and trade openness on one hand and agricultural performance on the other. In the short run, vtrade openness and FDI exerted a statistically significant negative effect on agricultural performance. Though inelastic, the sign of the coefficients showed that increased openness of Ghana’s agriculture through trade and FDI do not promote performance of the sector. These results provide evidence for an examination of the type of FDI attracted into the sector. Also, the detrimental effect of trade openness suggests a re-examination of the free trade policy to provide some cushion to sections of the sector to enhance output thereby increasing performance. INTRODUCTION The modes and indicators of openness include international trade, foreign direct investment (FDI) and international flows of capital and information (Osabuohien, 2007). Openness to trade has been measured variously (See Trued and Mikesell, (1955); Triffin (1976); Edwards, (1993); Sachs and Warner (1995, 1997a, b); Auguste (1997); Sala-i-Martin (1997); Edwards (1998) and Miljkovic and Shaik (2010)). However, that of Squalli and Wilson (2011), which is the (X+M)/GDP adjusted by the proportion of a country’s trade relative to the average world trade, christened composite trade share (CTS) is employed in this study. A non-trade measure of openness in the literature is foreign direct investment (FDI). Any investment scenario in which the investor owns at least 10% of the foreign enterprise is called a FDI (OECD, 1999). According to Rotjanapan (2005), FDI also refers to an investment involving a long-term relationship and reflecting a lasting interest and control of a resident entity © 2013 Kwame Nkrumah University of Science and Technology (KNUST) Journal of Science and Technology, Vol. 33, No. 2 (2013), pp24-36 24