Abstract:
Many developing countries are striving to attract foreign direct investment into their country
of which Ghana is no exception. They believe foreign direct investment inflows can boost
domestic consumption expenditure and eventually aid in the alleviation of poverty in their
respective countries. This key objective of this study is to investigates the impact of foreign
direct invest (FDI) inflow on household consumption expenditure in Ghana, the research used
secondary data from the world development indicators, ranging from 1975 through to 2016.
Foreign direct invest, trade openness, human capital, were some of the independent variable
used against household consumption been the dependent variable.
The model was estimated using the Ordinary Least Square Estimation Technique. The study
result reveals that, foreign direct investment has an adverse influence on household
consumption in the country, reason been most foreign direct investment are directed towards
the extractive industries and the mining of natural resources, proceeds from such venture are
usually repatriated back to the foreign country, with very little done to enhance domestic
consumption, the study also reveals that electricity consumption which served as proxy for
expenditure and human capital development has a positive influence on household
consumption expenditure. The result of the study recommends that the state should redirect
juicy policies and incentives given to foreign direct investors to development of human
capital and better infrastructure to domestic investor since this is likely to have a significant
positive effect on household consumption expenditure relative to foreign direct investment.
